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Soybean prices slip; China back in market

Soybean

The bad news in early July is that soybean prices have fallen significantly from its earlier highs, though they’re still in the teens, which is still positive. The good news is that China is back buying more U.S. soybeans.

“China is back in the market headlines for soybeans once again,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn. “There’s news of potential drops in tariffs, and we think China’s soybean crop isn’t going to be as good. So even though the soybean market has not been performing very well for farmers lately, there is hope that demand will remain strong for 2022-23. There’s a small glimmer of hope in the soybean market.

“Unfortunately, it does look like USDA might need to cut their export projections for old crop soybeans,” she continued. “We’re running out of time and we are not keeping up with where we were a year ago. So it does look like USDA may be able to add a few bushels on to our old crop balance sheet.

“The good news is that traders are not real concerned. They’re focus is on the 2022-23 balance sheet at this time,” she added. “Export sales have started to slow, but we do hope that there will be additional export sales in the 2022-23 marketing year.”

Part of the reason for being optimistic about sales is that soybean prices have dropped. Jensen noted that a lot of elevators in the area are now bidding off of November already, which was at $13.16 per bushel in her area.

“We were down 80 cents today (July 5), almost limit,” she said.

At one local elevator in west central Minnesota regularly followed in this column, as of July 5, cash soybean prices for July delivery were posted at $14.25 and basis was -30 cents under. The November futures price was $13.32 and basis was -64 cents under.

“It’s been a bloodbath over these past couple of days. That’s such a surprise because the USDA reports were so bland and we just didn’t see any big headlines out of that. No big surprises, and yet the market has just really taken blows,” she said.

“Part of it is because we were already ridiculously high to begin with. We have a large risk premium in the market. We know we have tight stocks. We know we need huge crops and we do have a risk premium in the market,” she continued. “Now, the more comfortable we get with …‘hey, farmers did get the corn and soybean acres planted, the weather forecasts are looking good, the crop conditions are turning good,’ we are losing that risk premium. We are losing it faster than anyone I think anticipated.

“The market is just starting to feel comfortable with what the crop looks like,” she added.

Right now, as of early July, overall crop conditions look good. In the Northern Plains, many soybean fields were planted late. But late crops really don’t become an issue until later, in August/September.

“As long as the crop looks green and lush, we’re going to call it good-to-excellent. It’s not until later into August until we start realizing that ‘why aren’t these beans setting pods, why aren’t they maturing, why aren’t they dropping their leaves?’ And so there’s not a lot of concern about a late crop until later in the season,” she explained.

“The crop can look great for us in July and go to crap on us in August. Soybeans do have more weather time available. The corn crop is made in July and the soybean crop is made in August, so soybeans do have a little bit longer of a weather potential and potential for rally,” she continued. “The volatility in soybeans is probably going to stay on longer than the corn market. So that’s good news for farmers if they still have additional sales to make.”

That said, Jensen noted that a lot of producers whose beans were planted late are concerned about whether there are going to be bushels to sell, or if there’s a freeze.

“So that’s something to look at going ahead. You might have more time once you have more confidence in the crop, there might be better prices for you ahead,” she said.

Jensen feels that many farmers were pretty aggressive at selling earlier when futures prices were higher.

“Talking with some farmers that I work with, some of them felt like maybe they were oversold. ‘Did I sell too much? I had to change my acres. Things got planted late. I don’t have confidence in my yields.’ And if that’s the case, you might want to be looking at purchasing some call options,” she said.

“The market has dropped significantly, if you feel like you have too many soybeans, or too much corn sold, you might want to look at buying a call option to kind of help you out a little bit if the market does rally again,” she continued.

“You know, some farmers still have quite a few bushels to deliver, and if you’re nervous that you’re not going to have those bushels, instead of buying back the contract at the elevator, which typically costs 25-30 cents (a bushel), you might just want to put that money into a call option instead,” she added.

“The elevator is not a brokerage firm. They are going to charge you for that. They want your cash grain. So be prepared if you’re going to try to buy out. Maybe what you want to do instead is buy a call option and then, if you don’t have the bushels and the market rallies, you’ll at least have the call option to help you write out that check to the elevator,” she concluded.

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