Soybean

It’s understood that the soybean crop is “made” in August as the crop depends on good weather to set pods and build the crop. This year, however, like many other things, the weather has not fully cooperated. However, on the bright side, that has helped boost soybean prices.

“For soybeans, this is the weather rally you’ve been waiting for,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn. “We all know that August makes the soybean crop. We need moisture in August. Pro Farmer went out and found record yields in beans, but every state had a little asterisk by it – ‘needs more moisture’ – and as of this point (Aug. 31), we have not received the needed moisture across most of the soybean area, and so traders are very concerned about yields.

“We’ve seen this in the past where we have a dry August and soybean yield dropped dramatically and that is what traders are watching,” she continued. “They’re watching the crop condition report. They’re going to be seeing how fast those soybeans start to dry down.

So there is a lot of nervousness in the soybean market right now.”

That nervousness has helped prices reach two-year highs.

“We all want to talk about ‘beans in the teens,’ but in reality our soybean market right now is at two-year highs,” she said. “The saying goes that when the plate of cookies goes around the table, don’t be afraid to grab a few, and I think that’s the opportunity that we have right now.

Even cash soybeans right now are over $9. We’re seeing a good futures rally and we’re also seeing basis levels doing really great things, too.”

At one local elevator in west central Minnesota regularly followed in this column, as of Aug. 31, the September cash price for soybeans was $8.33 and basis was -70 cents under. The October 2020 future price was listed at $9.33 and basis was a positive 3 cents.

On the demand side, Jensen pointed out that demand for U.S. soybeans is still strong and that China continues to buy soybeans, although most are from Brazil.

“We are still seeing good demand for soybeans and it is anticipated that that demand will disappear later in the winter when South America harvests their crop, so do keep that in mind,” she reminded farmers.

“I think beans are probably the crop you do want to sell off the combine,” she continued. “I think that’s probably going to be the best case scenario for a lot of farmers – to sell beans, either off the combine or only bin them for a short period of time. I don’t know that I want to hold beans into next spring.”

As stated earlier, China is taking some shipments out of the U.S., but at this time they are getting most of their beans from South America, which is going to start harvesting their soybeans in February/March. In July, China bought 80 percent of their beans from Brazil, mainly because of price.

“We’re not back to normal relations with China, but they are buying soybeans from us,” she said. “They prefer to buy from Brazil, but they are exceeding our expectations. China is buying more beans than what the market had anticipated, so that’s great news. But whenever it comes to China, you’re always kind of walking on eggshells. We’re not sure when it’s going to stop.”

At this time, even though China is buying more from the U.S. than it was initially anticipated, Jensen said it doesn’t look like China is going to meet the purchase goal that was established in Phase One of the trade agreement between the U.S. and China. But that could change.

“They are exceeding our expectations, but it’s not what we’d like to see in the long run,” she said. “This is something we really would have been disappointed in two years ago, three years ago, but right now we’re kind of happy with the crumbs they’re offering us. We get excited because they are buying U.S. beans, but they are still buddies with Brazil more than they are with the U.S.”

Looking back at the derecho, Jensen felt the soybean crop appreciated some of the moisture that came through with the storm in Iowa that dramatically impacted the corn crop.

“When you look at an Iowa soybean field right now, you don’t see a lot of storm damage. The corn is all flat, but you don’t see the damage in soybeans, except for drought damage,” she said. “The top areas of the fields are browning up. There are fields that are already turning in Iowa because of all that dryness. Though I don’t know that the winds caused any significant damage (to the soybean crop), but they are definitely in need of some rain across the Corn Belt.

That is why the market is rallying.”

And while she understands that producers are feeling better about this rally, she also issued a word of caution.

“I know this is exciting for soybeans to have this big rally, but also know the funds have been very, very aggressive at buying soybeans,” she said. “So we have the weather rally, we have the funds aggressively buying, and those are two things that can turn on a dime. If we get a rain or the funds begin to start selling, this rally could end very quickly.

“If farmers are considering selling, be aware that these prices may not be there tomorrow,” she continued, adding that it’s probably better to act sooner rather than later. “This is definitely when you want to talk about scale-up selling. You sell some bushels today, and you sell some bushels again in a week if the market continues to rally. But this is a weather rally and weather rallies don’t tend to last very long. So if we do get a rain, this could end quickly.

“I think we know that soybean yields are going to be reduced. It has been dry enough that we’re going to see soybean yields back off a little bit. But the market is at two-year highs, so we need to take advantage of that.”

Jensen said she wants farmers to realize that the soybean market is flat and that there is no carrying charge.

“There is not a lot of incentive to store soybeans,” she said. “The market really does want your beans this year in 2020, or at least at the beginning of 2021. So when you’re making out your plans, do keep that in mind that prices may not be higher. Actually, today they are not higher when you look at delivery for next spring. But if you need to generate cash, soybeans are the crop to do that.”

Regarding ending stocks, initially the U.S. was looking at ending stocks of 610 million bushels (MB), according to USDA’s August report, but that is going to be reduced.

“We’re probably looking at reducing that, both in terms of yields and probably from an uptick in demand, but even if we get down to the 400-500 million MB range, that is still not bullish,” Jensen said. “I don’t call that bullish. It’s not as bearish, but it’s certainly not bullish.

“One thing that would help us this winter is if South America did have crop problems. That would certainly change our scenario quite a bit. But if we assume South America is going to have an average crop, the prices that we’re seeing today are a pretty good sales opportunity,” she concluded.