Soybean

Soybean producers had reason to smile as November began with continued strong demand and prices moving to levels they haven’t seen for some time.

“We’re at over $11 futures now for soybeans. If you go back and look at the history for soybeans, that does not happen very often,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn. “We’ve rarely had an 11 in front of our soybean price, so the market is certainly going higher.”

Besides futures prices being high, basis levels are relatively strong, as well. In northern Minnesota, as of Nov. 9, cash prices were over $10.50 and basis was at about -50 cents under. So there are some pretty great opportunities.

At one local elevator in west central Minnesota regularly followed in this column, as of Nov. 9, the November cash price for soybeans was $10.53 and basis was -60 cents under. The January 2021 futures price was listed at $11.13 and basis was a positive 12 cents.

Jensen noted that a lot of producers, including herself, sold much their beans and don’t have a lot of beans left to sell, but if they want to take part in this rally there are still opportunities.

“You do need to own 2020 soybeans,” she said. “You’re probably going to own 2021 soybeans. If you’re going to plant beans, you already own those. But if there continues to be a rally, it’s probably going to be the 2020 crop that is short and not the 2021 (crop). So if the market continues to go higher and you want to take advantage of that, you may want to sell 2021 soybeans and hold on to 2020 soybeans.”

Markets, especially in soybeans, can become greatly inverted, and right now Jensen said producers are already seeing 2020 soybeans at a dollar premium over next fall’s soybean harvest.

“In other words, what you just harvested is worth a dollar more than what you’re going to harvest next fall,” she explained. “And that could easily go to $2 or $3 more, as well. That’s something soybeans are known for. They’re known for a lot of volatility.

“If you’re thinking, ‘Boy, these prices are pretty great, I want to sell, but I also want to take advantage of a rally,’ you may want to price 2021 soybeans to kind of hedge yourself instead of selling out of all your 2020 soybeans,” she added. “Different crop years can have different prices and we’re already seeing that and that spread may get even wider.”

Jensen pointed out that soybeans have a couple factors in their favor. First, there is still good demand, mainly from China. However, at this point she said the U.S. is trying to slow down Chinese purchases, which is the point of these higher prices.

“South America’s soybean crop is still unknown and so we want to make sure that the U.S. does not run out of soybeans,” she explained.

“So this is a unique thing we have. We haven’t had a demand market, kind of since the trade war began. But right now soybeans are definitely in the demand market and we’re just watching China to see how aggressive they’re going to continue to be,” she added.

So far this year, China has just been very aggressive at buying soybeans overall from various sources. In October, China bought 40 percent more beans than they did a year ago. Most of those beans were sourced from South America and the United States.

“They’re not only buying U.S. beans, they’re buying soybeans from wherever they can find them. And so we are definitely keeping an eye on the South American weather and watching to see if they’re going to have enough crop to supply them,” she said.

Another thing that’s lifting up the overall markets was the good news that came out Nov. 9 about a potential vaccine for the coronavirus.

“The coronavirus is definitely a wet blanket over all of the markets, the entire economy,” Jensen said. “The markets did not handle the coronavirus well last March when this started and so the fact that there’s a potentially good vaccine seems to be really lifting up the markets overall. We’re talking stock market, fuel prices, and corn and soybean prices.

“If we can avoid a mass shutdown this winter, that’s going to be great news for the economy overall and that’s going to help our commodity prices, as well,” she added.

The news about the potential vaccine came the week after a long week of vote tabulations that saw former Vice President Joe Biden declared the President-elect. Asked what effect, if any, the results might have on policy or the markets, Jensen said that at the moment it does not appear that Biden is going to be changing China policy.

“Perhaps that will happen in the future, but early indications are that he’s not going to change things dramatically from what President Trump has done,” she said.

“But one thing that is reassuring is the markets like stability and they don’t want to see one party in control, and so the fact that right now it appears the Republicans still have the Senate is good news for the markets,” she continued. “But there are still some run-off elections to be had, but right now it appears that the Republicans are going to hold the Senate and that’s good news for the markets. They get a little nervous if one party takes over everything.”