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USDA report pressures soybean prices

USDA report pressures soybean prices

Soybean

In its Sept. 10 report, USDA came out with its September crop production estimate, which included a decrease in acres and an increase in projected yield, neither of which was unexpected. The report was considered neutral to slightly bearish and put pressure on soybean prices as harvest in the Northern Plains was beginning to get underway.

“What was surprising with USDA’s crop production report … was that we didn’t expect to see a big increase in acres, which we didn’t. They actually decreased the acres for soybeans,” said Randy Martinson, president of Martinson Ag Risk Management, Fargo, N.D. “We were expecting to see an increase in yield and we did see that.”

The trouble with soybeans, according to Martinson, is that demand has been a little slower than normal this year. Normally, at the time that the new marketing year starts, which was Sept. 1 for both soybeans and corn, the U.S. typically has about 50 percent of the exports booked for the following year.

“We don’t have that many sales on the books. We’ve got a decent amount, but not like we’re used to. That tells us that China’s demand is going to start to slow down,” he said. “Well, as of late, they’ve been coming in and they’ve been buying pretty aggressively, so the bigger South American crop kind of staved off them needing to buy from the U.S., (but) now they’re coming to the U.S. and buying.”

Martinson also noted that there is some concern in the market because of the ports being shut down, but most of those are getting back up and running, so it’s becoming a non-event at this point.

In the U.S., soybean harvest has started and the early yields have been somewhat lackluster with most of them in that 25-50 bushel per acre range, depending on the area.

“(That’s) kind of disappointing with what we've seen over the last few years,” he said.

“I think that trend is going to continue for beans. I think the story for beans is going to be later because I don’t look for the production to be there,” he continued. “China’s going to continue to need to buy, especially if South America comes in with some sort of a production issue for their next crop.”

Soybean planting in South America could be delayed because of dry conditions, which could have an impact for that crop. Although the forecast is calling for some rain, right now conditions there are dry and it looks like there may be a slightly slow start to the planting season, which will delay their harvest and prevent the beans from coming on-line in a timely manner.

“So we should see demand stay fairly decent and last for a while for the U.S. beans,” Martinson said. “China’s demand isn’t really slowing down it doesn’t look like. They’re expected to import 3 million metric tons more this year than they did last year, so they’re going to be in the market to buy beans. It’s just – where are they going to get it from?”

With soybean harvest getting underway in areas of the region, Martinson said there may be some marketing opportunities for producers.

“I definitely think that soybeans is the market where we have to see what’s out in the field before we want to get too much more aggressive on pricing,” he said. “If you’re worried, buy some short-term puts to cover the market for the short-term. I think this is something that between the October to January timeframe we’ll have some pretty decent opportunities to do some pricing for soybeans. What’s interesting is that I think the demand will help and then will push the market there.”

Basis levels for soybeans continue to be strong, though not as good as corn. “But they still continue to be strong and it tells us there are trains that are being booked that elevators don’t have the beans for and that they kind of need to get aggressive to get them,” he concluded.

Looking at local prices, at one elevator in western Minnesota regularly followed in this column, as of Sept. 14, the September delivery price was $12.66 per bushel and basis was -20 cents under. The February 2022 futures price was listed at $13 and basis was +2 cents over.

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