As the 2019 soybean harvest drags along because of cool, wet weather conditions, farmers are considering their options regarding what to do with the crop coming off and what they have stored. Good basis levels are giving them something to think about.
“The nice thing is, just like on the corn side, we’ve seen basis push because we had a late harvest and soybeans are seeing the same thing,” said Luke Swenson, president of The Money Farm, West Fargo, N.D. “Elevators are trying to fill trains and we’ve got guys who are trying to deliver beans at 80 (cents) under around here, which is not a very common number around harvest and it’s the first time we’ve seen a number of that type in a few years, ever since we kind of started this trade war a couple years ago.”
At one local elevator in west central Minnesota regularly followed in this column, as of Oct. 30, the November cash price for soybeans was $8.43 and basis was 92 cents under. June 2020 cash price was listed at $8.72 and basis was 98 cents under.
“We’re excited to take it from the guys that have some beans who are taking them to the elevator. Take it and re-own it and be happy with that good basis,” he said. “But just like with corn, we’re about half sold and we’re sitting on the rest and we’re going to let this story play out.”
Swenson offered some suggestions to producers as they continue to try and get this year’s crop off the field.
“If you’ve got grain in the elevator, take the good basis if it’s there and re-own on the board, because it’s going to be a lot cheaper than paying storage,” he said. “Don’t get into the basis ‘roll of death’ where you just keep rolling every month and taking the carry. There’s a lot of guys that do that and they say, ‘well, I’m not paying storage,’ but if you’ve given up the carry the whole time you’re not really giving yourself that gain. Only with a big eruption higher in the market does that work in your favor. So figure out which way you want to manage it and manage accordingly.”
While harvest drags out, the market is also continuing to keep a close watch on the ongoing trade war with China. Recent news that China was going to make a purchase of 30 million metric tons of U.S. soybeans was positive, but there still isn’t a resolution.
“Every time we’ve seen a headline ‘there’s a big trade deal coming,’ the first thing we always do is search the South China Morning Post and see what they are saying, and until recently, they’ve never followed any of the rhetoric,” Swenson said. “Trump would tweet out ‘China’s going to make purchases,’ and the South China Morning Post would say ‘Trump is asking China to make purchases.’ There was never a correlation between the two. It was always Trump is saying ‘something is going to happen’ and them saying ‘this is what Trump wants to happen,’ not ‘we have talked about facts.’
“The thing I think you’re seeing – and as much as I love politics, I disdain them greatly – but as you’re looking at how all this is playing out...China is hurting,” he continued. “Obviously, they’re feeling the effects of the trade war, that isn’t hidden, but I think they’re feeling it a little more than what people are letting on.”
Swenson feels China is going to wait and see what candidate emerges from the field of Democrats and support them to try and push out Trump.
“They’re going to try and interfere and advertise as much as they can this election to help the Democrats,” he said. “Well, they’re getting close to the point where it doesn’t look like any decent front runner that’s new is rearing (their) head to bring out the vote, so I think they’re a little nervous.
“Then Trump has his impeachment inquiry coming, so I think China is looking at it from the standpoint of ‘wait, this is maybe a good chance for us to slink back into a smaller deal than we want to do,’ and get away from some of the topics and acquiesce on some,” he continued. “They’ve really actually made some concessions on the foreign investment rules, stuff like that, which is a big, big deal. So I think it’s a good win.”
He doesn’t feel that the U.S. is going to get as much done as it wants, however.
“The nice thing is Trump knows he’s annoyed everyone in the ag world with the RFS (Renewable Fuels Standard) deal, so a trade deal getting done with, say half of the points they want to cover, and then getting some extra ag exports out of it might be Trump’s way of keeping the oil boys happy and keeping the farmers happy by not having to fix the RFS if we can put in some extra demand from the Chinese side,” he said.
Though details of any deal are scarce, Swenson said some analysts feel the first year of this deal should put the U.S. back to one of the top three export years for China and scaling up from there.
“The only question is, we’ve got to get into the details of it,” he said. “Is it all going to be raw materials? Is it going to be finished pork and poultry? That’s the unknown that we don’t have yet.
“We’re seeing that they’re passing out 10 million tons of exemptions to a bunch of their domestic buyers so that they can actually go in and keep coming back in the market and score some points and hopefully push this thing along,” he said. “I’m actually a little optimistic that we’re going to see it get done.”