The soybean market has been clinging to the hope that the U.S. and China can solve their trade dispute in order to spur demand and move the market out of the doldrums. That hope was elevated in late January when negotiators from the two countries met and announced the potential for huge sales of U.S. soybeans to China. As of Feb. 5, the soybean market was still hanging on to that hope as actual sales had not yet developed.
“We thought there would be some big movement following the trade talks between the U.S. and China on Jan. 30-31. There have been a lot of rumors (of big soybean sales), but so far no follow through,” said Betsy Jensen, Northland Farm Business Management and a farmer/marketer from Stephen, Minn.
“I believe the words were ‘tremendous and massive amounts of soybeans’ that were going to be sold to China, and as of this point, we’ve had neither.”
That said, the market “is still cautiously optimistic,” according to Jensen.
“The market gets a little excited when it sees a few headlines, but it gets disappointed when it doesn’t see the follow through,” she said. “It was up a couple cents when the rumors of more trade got announced, but now the trade is looking for follow through.
“We need confirmation of those sales, not just a few press releases and a few token statements. We actually need something to be sold,” she added.
Like the past several months, the soybean market is still looking at the Chinese situation to decipher what’s going on and what direction it will move.
Following trade discussions, prices did move up slightly. Locally Jensen was able to get cash beans over $8 once again in northwest Minnesota. How much higher prices go depends again on the successful conclusion of the trade dispute.
“We are at the higher end of our recent range,” she said. “So, the market goes up and reaches that $8 mark, we’ve done that since December, but we really haven’t been able to break much above $8. That’s about as high as it goes and then it starts to trickle back down again. So, $8 cash beans in my neighborhood is about as high as the market is getting.”
With prices around $8, the basis has remained mostly steady, near $1.25 under at Stephen and a little over $1 at other locations.
As of Feb. 5, local cash soybean prices at one elevator in west central Minnesota regularly followed in this column were $8.12 a bushel and basis was $1.07 under. October 2019 soybeans were listed at $8.50 with basis $1.10 under.
“We haven’t seen any excitement in basis and part of that is we need export sales in order for basis to improve,” Jensen said.
Recently, farmers may have been buoyed after seeing news that the European Union could buy more soybeans, even though it’s not as significant a market as the Chinese market.
“It really is dwarfed by the size of the Chinese market. Although it’s certainly good news that the EU is going to be importing more U.S. soybeans, but it’s not enough to make this market bullish,” she said.
Given the situation with soybeans and still the uncertainty with the U.S./China dispute, there are some things farmers need to consider heading into the 2019 growing season.
“I don’t know that this is the time to sit and wait,” Jensen said, adding that the challenge with soybeans is a massive carrying charge.
“There is such a huge carrying charge going into next fall,” she said. “The market is going to have a lot of beans this summer that need to be sold. Someone has to store the beans, but I don’t know if the farmer is interested in doing that. But there is a huge incentive right now to price beans for fall delivered off the combine. You’re getting a big premium.
“The downside to that is that markets with a full carry tend to be very bearish,” she continued. “We get full carrying charges when we have large stocks and not very good demand, so when you look at the soybean market right now, we have large stocks with not a whole lot of demand. So, unfortunately, it’s not a bullish market in soybeans at all.”
In the meantime, farmers will be looking ahead to 2019 planting considerations and for any concrete news regarding ‘tremendous and massive’ sales to China.
“Just keep watching for confirmation of rumors. We need more than just rumors, we need confirmation that the market really cares about sales to China,” she concluded.