Soybean

All spring there has been concern in the corn market due to a delayed start to planting and slow planting progress. As a result, corn prices have rallied. Soybeans are now looking at similar concerns, but prices haven’t risen like they have for corn.

“For soybeans it’s kind of the same as what we’re seeing in corn to the fact that we’re looking at late planting and there are concerns about getting the crop planted,” said Randy Martinson, president of Martinson Ag Risk Management, Fargo, N.D.

“On the flip side, there is a little bit of concern that soybean acres could see an increase, especially when you look at the Corn Belt,” he continued. “With the new MFP (Market Facilitation Program) program that USDA came with, no county payment will be made on prevented plant acres and that has a lot of concern right now as far as the Corn Belt, because if they can’t get the corn planted because it’s too wet, they’ll go in to try and plant beans. That is going to be a little bit of concern.

“Prevented plant normally is not something they typically like in the Corn Belt; they’re not as used to it as we are here in the Northern Plains. They tend to try and shy away from prevented plant acres and this could be the first year where they look at it,” he added. “But it is causing some concern in the soybean sector about the possibility of maybe seeing an increase in acres and we’re already somewhat saturated as far as the market is concerned with stocks.”

At this time many in the market feel that producers aren’t going to get all the soybean acres planted because there will be some prevented plant soybeans as well, especially in the western Corn Belt and the Northern Plains.

On top of that, he explained that yield will have to be pulled back some although it’s a bit more of a question mark for beans because there’s a lot more growing season left and a lot more potential with beans.

“Once you get to June a lot of things can change and that’s going to be the wild card in the bean market,” he said.

The ongoing trade dispute with China continues to weigh heavy on the market, specifically soybean exports, especially given that negotiations have broken off and both sides have increased tariffs.

“China is virtually out of the market. We’re not going to see them as being any major player here for another year, possibly longer,” Martinson said. “We are at a complete stalemate as far as the trade talks are concerned and it’s not likely the talks are going to resume any time soon.

“We are talking with Japan, we are talking with the European Union, and hopefully we can keep some trade negotiations going with them to get a deal worked out,” he added.

Martinson also pointed to the USMC Trade Agreement, often referred to as NAFTA 2.0, as a means of helping to keep some flow of meal going down into Mexico and that will certainly help the market.

“We’ve lost our major buyer (in China) and it’s not likely they’re going to return to the market here for a couple years,” he said. “Then we throw in this idea that we might see stocks increase because of a switching of acres because of how wet it is. It’s kind of kept the market a little bit at bay. There are concerns, of course, with where acres are going to fall. With corn rallying, beans are somewhat going with it and trying to keep up in the short term, but it’s not going to have the same staying power that corn will have on a rally.”

The countries of Canada, Mexico and the U.S. have not ratified the USMC trade agreement, but they are one step closer now that President Trump has agreed to lift the tariff on steel and aluminum imports from Canada and Mexico.

“That gets us one step closer and at this point it does appear that it has a lot better chance to get through the Canadian government and the Mexican government. If that happens I think ours will be forced to bring it up sooner rather than later, so I am expecting that by early fall we should see a NAFTA 2.0 done,” Martinson said.

The African swine fever, which has had a major impact on hog losses in China, has been minimized in the market somewhat because China is already largely out of the U.S. soybean market anyway. Although China has been importing a little bit of U.S. pork to meet some of the demand there, the demand for soybean meal, meal products or feed products has not changed a lot in China because they’ve switched over their animal production to poultry and aquaculture, so their feed demand is still very strong, it’s just not going to hogs, but instead it’s going to these other products.

What’s helped the U.S. somewhat is the fact that prices of South American beans have been increasing.

“They’re a little bit higher priced than ours now because of the issues we’re seeing here in the U.S.,” Martinson said. “Basically Brazil is thinking they’re going to get the demand so they’re raising the price because they’re going to sell them for as high a price as they can get from China. So (these) prices, as far as the world is concerned, means U.S. beans can still be competitive in the world market, it’s just that we’re not selling them to China.”

Instead, the U.S. has been moving some to South Korea, Mexico and other countries that are continuing to buy. But, of course, they don’t have the same appetite that China does and China has pulled back on some of their soybean imports and are relying a little more on their own domestic supply at this point.

On the demand side, at this time for old crop soybeans the U.S. is at about 1.7 billion bushels and has sold about 95 percent of what has been expected. Shipments are running a little behind because the U.S. still has a lot of sales on the books to China that they haven’t taken yet.

“We’ll see if that follows through, but we’re sitting with shipments at about 69 percent of expectations which is a little less than what we’d like to see,” he said. “Of course sales can be cancelled and it’s going to be interesting how these last three months go for sales and shipments of soybeans. But right now it does appear that we should be able to be okay and make USDA’s reduced level of exports.”

Market prices at this time are still sitting below what farmers would like to be selling at.

“As far as new crop, 2019 prices are hanging right around $8.75 on the futures and just shy of $8.50 for old crop which means you’re looking at sub $7.50 price for cash soybeans which isn’t very attractive to a lot of producers,” he said.

As of May 29, local cash soybean prices at one elevator in west central Minnesota regularly followed in this column were $7.54 a bushel for June and basis was 94 cents under. December 2019 corn was listed at $7.71 with basis $1.15 under.