Soybean

Although soybean prices may have come down slightly, demand for U.S. soybeans has remained very strong as harvest continues throughout the region.

“Soybeans have had a good run. We traded up to two-year highs, which nobody thought was possible,” said Randy Martinson, president of Martinson Ag Risk Management, Fargo, N.D. “But a lot of it is coming off the back of exports. Corn exports have been strong, but soybean exports have been on fire. In the first four weeks of the 2020 marketing year (the U.S. has) already sold 60 percent of our expectations for soybeans with a majority of those going to China and unknown destinations.”

China has been very aggressive in buying U.S. soybeans as it is working toward meeting its commitment in Phase One of the U.S./China trade agreement.

“The concern is that they’ve been just buying and we’re not shipping them yet and then some of these sales could be canceled as we get to the New Year, once South America comes online,” he added.

The biggest concern at this time, according to Martinson, is that the U.S. has the cheapest beans in the world. The price in South America, in Brazil especially, has been increasing because of inflation, their currency and then also the fact that they’ve oversold their product and they’ve got tight supplies. As a result, they’ve been needing to re-import from the U.S. to make sure their domestic needs get met.

“That’s helping to keep interest in our soybeans as far as the export market is concerned,” he said.

However, Martinson pointed out that China is going to be on holiday until Oct. 8, which could create a little problem.

“We had run up to that $10.45-$10.47 area and ran into some stiff resistance and then we’ve seen this market pull back,” he said, adding that harvest pressure, better than expected yields and also the fact that China is now out of the market for a little while are all combining to put pressure on the market and a cause for concern.

“There’s an idea that we’re going to see higher acres next year and South America is going to see a pretty big increase, as well, some say a potential increase of 6 percent in acres...so all that kind of helped to pull the market down,” he said.

That said, Martinson doesn’t think soybeans are done just yet.

“I do think that demand will come back again for October and November and we’ll see this market try to go back up and test its old highs,” he said. “But there’s no carry in this market, there’s no incentive to store, so producers should be looking at moving the beans off the combine, and if you want ownership, look to own a call or buy a call option and have ownership because it’s much cheaper than owning the actual bean.”

Martinson pointed out that local prices are anywhere from around $9 out and all the way up to $9.23 for October/January delivery. At one local elevator in west central Minnesota regularly followed in this column, as of Sept. 29, the October cash price for soybeans was $9.23 and basis was -65 cents under. The December 2020 futures price was listed at $9.92 and basis was -8 cents under.

“That’s the other part,” he said. “We’re looking at much better prices than what was anticipated by what a lot of guys had in their cash flows when they were doing those this spring for the bank, so we’re looking at a lot of them being almost a dollar above. There is some incentive to sell this crop, like I said if you want ownership it’s better to have it with call options, just pay that little premium than owning the product.”

Meanwhile, soybean harvest at this time is a little better with soybeans than corn with about 20 percent of harvest complete, which is better than the five-year average of 15 percent. Up in the Northern Plains, North Dakota is at 27 percent complete vs. 19 percent on average, while Minnesota is at 31 percent complete compared to the average of 18 percent.

“So I think the last couple years have scared enough guys so that now that they can go they’re going on soybeans and trying to get them harvested,” he concluded.