The U.S. and China are expected to sign phase one of a trade deal this month that could help end the trade war between the two countries and that has soybean producers and the market excited. But the deal hadn’t yet been signed as of this writing, which was supposed to take place on Jan. 15.
The other item the market was anticipating was the upcoming USDA supply and demand report, which was due Jan. 10 (after this article was written). Both the soybean and corn markets were anxious about the trade deal and USDA report because both were short on details, so the excitement was tempered.
“From a technical standpoint, soybeans are following the same line as corn. We sold some more soybeans (like we did with corn) because they’re pushing up against some big resistances at $9.75,” ,” said Luke Swenson, president of The Money Farm, West Fargo, N.D. “You’ve got a nice 50-60 cent run into the upcoming USDA reports and you’ve got a lot of fund adjustments. We went from 60,000-70,000 contracts sold short to probably 10,000 to 20,000 long in about a month and a half period. That’s a lot of fund buying coming into that report and it could be a little unknown,” he added.
“Then we go and drop a bomb in Iraq and blow up an Iranian general and kind of tick off a couple of the bigger Middle Eastern countries again and send crude rallying,” he continued. “It makes the rest of the export markets a little nervous as it’s obviously trying to take a stance on that as well.
“But everyone is going to sit and watch what China says on Jan. 15 and what the official terms of the agreement are when they come out,” he added.
In regards to the USDA report, Swenson said that from a supply side in the U.S., he doesn’t expect much as far as a surprise.
“Maybe they shave it down 10 or 20 million bushels on some acres not getting harvested, trimming it up a little bit, but I’m not expecting any real back-fill numbers on the 10th,” he said. “Everyone’s watching because, obviously, soy and soy products are going to be the leading things to come out of the China deal, if we’re signing the deal for $40 billion.
“If $24 billion was that record before, obviously they’re going to go with their primary goods here,” he continued. “If they have to overpay a billion or two to get them all from the U.S. to meet those quotas, I think they’ll do that. That might be the feather in the hat that actually keeps these markets pretty balanced, where we might see more bean acres than some might expect next year.”
Looking at prices for soybeans depends on location. Swenson noted that some locations are at about $1 under for basis and a bunch are around $1.25 under as well.
“Everyone is a little nervous, and a little quiet about how much they’re trying to scrape for grain,” he said. “However, you get into south central Minnesota you’re upwards of -30 cents under. It’s a 70 cent spread that you get over there.
“It’s kind of like the corn market. We’re pulling more from the interior than we ever have before. But no one knows, is that really because we’re at a shortfall, or if it’s just the way farmers are holding on to things,” he added. “I think it’s more of a shortfall than people anticipate, but that will remain to be seen going into summer.”
At one local elevator in west central Minnesota regularly followed in this column, as of Jan. 7, the January cash price for soybeans was $8.68 and basis was -73 cents under. The August 2020 cash price was listed at $8.90 and basis was -80 cents under.
Recommendations for soybean producers, he noted, are the same as for corn producers.
“We’re at 60 percent sold and 20 percent re-owned,” he said. “Other than that we’re going to let this market work with ending stocks down to 475 billion bushels in the U.S. before you get into these winter revisions and whatever the China news is. There’s a lot of room for this market to move and bounce around.
“Long-term I’m bullish soybeans. I think 2020 could be a pretty good year across the board, which I don’t think I’ve said for a long time,” Swenson concluded.