Many of the same story lines for corn apply to the soybean market as well, but one glaring difference is the huge number of carryover stocks soybean is having to deal with.
“Here’s the problem with soybean in a nutshell: The stock levels of soybean ending this crop year and going into next crop year are just too big,” said Ed Usset, professor emeritus and grain marketing economist with the University of Minnesota. “We’re looking at a carryout of 1 billion bushels this crop year. It’s huge. We hardly have a reference point to that type of carryout relative to usage.
“And, frankly, soybean is weighing on the corn market. The corn fundamentals on their own, I think we could argue that prices should be higher. But you’ve got this thing called soybean. They’re like a weight on a balloon and they just won’t let it go.”
Some have argued that soybean stocks could fall by 25 percent in the year ahead, which on its own, sounds quite significant. And it is, but not necessarily in the case of soybean.
“Twenty-five percent sounds impressive, except that if you go from 1 billion bushels to 750 million bushels you really haven’t solved your problem because 750 million is still too many,” he said.
According to Usset, the outlook for soybean is that the fundamentals are bearish and they remain that way, and it shows in the price.
“You look at soybean and what they’ve done price-wise, we’ve had a nice recovery to a degree,” he said. “I’m looking at new crop soybean at around $9.10. Well, they spent the winter up around $9.50 or better. It beats the hell out of the $8.30-$8.40 we saw in mid-May, but nevertheless, we haven’t recovered to the levels we were at last winter, which is not true of corn. We have moved well beyond those. There’s a difference there.”
At one local elevator in west central Minnesota regularly followed in this column, as of July 22 the cash price for soybean was $8.10 and basis was 80 cents under. November 2019 cash price was listed at $8.12 and basis was 95 cents under.
One story line soybean shares with corn is the anticipation of the upcoming report from USDA following its resurvey of farmers for final planted acres. The previous report the end of June raised concern that the numbers were askew for both corn and soybean. Because of the late start to planting and difficult conditions this spring, many thought that corn numbers would be much lower than the March intentions report indicated and that soybean would be higher, but that was not the case.
USDA decided to resurvey farmers and that report is expected Aug. 12, Usset noted.
“That report will be just as important for soybean as it is for corn,” he said. “I think the sense out there is that the late corn plantings was good for soybean plantings,” he continued. “(Producers) would say ‘if it’s too late for corn, I’ll go and get some beans in.’”
Usset feels corn acres will definitely be less than the June report and that bean acres will be adjusted as well.
“That number will be just as interesting,” he said.
Another matter soybean shares with corn is the ongoing trade negotiations with China, as well as trying to get the USMCA (U.S./Mexico/Canada Agreement) for trade approved. The issue with China is more pressing for soybean than for corn, however. China had been the largest export market for U.S. soybean prior to the trade war, and with them basically out of the market, that is a big reason for the large carryover stocks the soybean market is burdened with.
And, unfortunately, negotiations between the two countries are not moving quickly. Negotiators from the U.S. and China have spoken by phone only twice since the trade war truce at the end of June and there has been no news of any positive resolution. However, at least the two countries are still negotiating.
“I’ll just say one thing and that’s apparently trade wars are not easy to win,” Usset said. “We’re one year into it and it’s not happening.”
Getting the trade issue resolved “would be a wonderful thing” for soybean, but there are other factors also in play that are adding to the challenges, one being the African swine flu that has caused huge losses in the Chinese hog herd. China has been a big buyer of soybean meal to feed their hogs, but with the herd decimated by the disease, even if a resolution were found tomorrow there wouldn’t be as much demand for meal.
“Soybean just can’t buy a good story line right now,” he said.
Usset offered this advice for producers as August approached, which is when the soybean crop is “made.”
“Clean up old crop. Use this opportunity as there is no guarantee it will stay this way. You have to take a hard look at new crop too,” he said. “Someone who says ‘I’ll wait for that August report,’ well, that’s all fine and good, but reports can be both bullish and bearish.
“You have to make sure that you haven’t set yourself up on waiting for this bullish August report and the darn thing comes out and it’s not so bullish and we’re down and you failed to take advantage. So take advantage of something while you have the chance,” he concluded.