Soybean

Trade discussions between the U.S. and China may have stalled for the time being, but that doesn’t mean the situation with China isn’t top of mind awareness for producers.

Producers and the soybean market in general are continually watching what is going to happen with China, even though nothing has really changed in the last month, according to Luke Swenson, president of The Money Farm, West Fargo, N.D.

“(The two countries) have postured a little bit back and forth, but talks for the most part have stalled and we’re not expecting any big change,” Swenson said. “It feels and looks like China is going to make the run for the 2020 election and roll their dice with what comes out of it.”

If that is the case, China is taking an awfully big chance, said Swenson, adding that if he was China he would try and find a solution before that.

“There’s a chance you’re still going to have Trump for the next four years,” he said. “I’d lean in favor of getting something done now because if you fight with a guy like this until he gets to a spot where he has nothing to lose, if he gets re-elected, he can be as stubborn on this as he wants. That would worry me a lot more than anything.”

On the flip side, production in South America looks to be cruising along and they have been more than willing to meet China’s soybean needs, so it is also in the U.S.’s interest to find a solution as well.

“Brazil and Argentina are going into harvest with close to a record crop with most expectations in the 110-115 billion bushel range, although there are some estimates above that. (They) have consistent production that fills basically all their needs so I don’t think they’ve been too worried,” Swenson said. “Currency has been softening, so they’ve been a nice cheap export option even on top of the cheap markets. And with the U.S. and the tariffs … that continues to help them out, so they’ve got a good crop and they are pushing a lot of it through to China and Asia as fast as they can.

“The one problem is if they ever have a production issue this year. If that happens, you could see that billion bushel projection drop down pretty darn quick going into next year and I think that’s where you’re going to see a little premium get built back into soybeans,” he added.

On the demand side, U.S. soybean exports are “okay,” according to Swenson, adding that export inspections for the week were “bouncing around at 830,000 tons.”

“They’ve been sub-par, but in line with what some have been expecting them to be because of the trade war, but we haven’t been getting any of the China business and that’s been showing,” he said. “The world is awash with beans and, unfortunately, for some of the Asian countries we’ve been the more expensive option recently, so there hasn’t been a lot of news shaken out and that probably won’t change until we get later into this season and see if they actually start dropping down yield expectations for this year.”

Local cash prices in the region are hovering around under the $7.50 mark for new crop and basis is sitting at about $1.30 under, Swenson noted on June 10, adding that futures have rebounded quite nicely.

“We basically put a dollar back into beans before they pulled back this week as well,” he said. “We were up to the $9.25 range and then they sat back and finished the day today (June 10) bouncing around at $8.87 November.”

As of June 10, local cash soybean prices at one elevator in west central Minnesota regularly followed in this column were $7.58 a bushel for May and basis was $1.02 under. December 2019 corn was listed at $7.87 with basis $1.15 under.

As for recommendations for producers, Swenson said they were more heavily sold on beans and were just sitting idle for the time being.

“We’re 50-60 percent sold there and we’ve got re-ownership in place on a little bit, but we’re just going to let it work,” he said. “If we see it moving back toward that $10 or so mark, you might see us get more aggressive, but for now we’re happy with our sales in the mid $9s and we’re going to let the market work and see what happens going into July and August.”