Soybean prices aren’t anywhere near where producers want them, or need them, to be as harvest is just weeks away, and there are serious concerns about soybean production this year and whether production will be able to match the latest estimates from USDA.
At one local elevator in west central Minnesota regularly followed in this column, as of Aug. 20 the September cash price for soybeans was $7.65 and basis was $1.05 cents under. December 2019 cash price was listed at $7.73 and basis was $1.10 under. That’s well below the cost of production.
According to the latest World Agricultural Supply and Demand Estimate (WASDE), which USDA released on Aug. 12, soybean production is forecast at 3.68 billion bushels, down 165 million on lower harvested area. Harvested area is forecast at 75.9 million acres, down 3.4 million from the National Agricultural Statistics Service June acreage report led by reductions for Ohio and South Dakota. These states account for almost half of the national reduction.
The first survey-based soybean yield forecast of 48.5 bushels per acre is unchanged from last month, but 3.1 bushels below last year’s level. With lower production partly offset by higher beginning stocks, soybean supplies for 2019-20 are projected at 4.77 billion bushels, down 3 percent from last month.
“You’ve got yields that didn’t come down when we got our last WASDE report a week and a half ago,” said Luke Swenson, president of The Money Farm, West Fargo, N.D., who recently traveled through the Corn/Soybean Belt and was caught off guard by what they didn’t see.
“The big thing that surprised us is the bean pods literally weren’t there,” he continued. “We didn’t see a pod (in parts of the tour) and those guys are less than a month from combining. Do they really have enough time to actually go in and pump 50 bushel beans when they need 67 like they had last year?
“We don’t think it’s there and that’s going to be the hard one for the market to try and figure out,” he added. “Around here we don’t have record beans coming. Iowa is in pretty good shape, but if you sit and crush the eastern side of the Corn/Soybean Belt, who is going to make up for some of those yields?”
“You sit and shave 20 bushels off a 70 bushel yield … it will take a lot of other fields to make up for that pullback, and the fact that we’re still expecting 49 bushels for beans seems very hard to believe.”
On the demand side, U.S. soybean exports were reduced 100 million bushels in the WASDE report to 1.78 billion, reflecting reduced global import demand, mainly for China. Soybean ending stocks are projected at 755 million bushels, down 40 million.
Regarding demand, Swenson said the U.S. is caught between a rock and a hard place with South America. With the trade war with China still ongoing, U.S. sales of soybeans and soybean meal to China have been diminished this year, although earlier this year China agreed to buy some U.S. soybeans albeit a much smaller amount than they have in the past.
“We’ve got a couple hundred million bushels that still need to get shipped to China, but they haven’t been shipped yet,” he said, adding they may still get cancelled, but no one knows as of yet and trade talks have broken down once again. In the meantime, China has turned largely to South America for its soybean needs and there is concern the U.S. could lose market share to South America permanently.
“The tariffs are on and so the rumor has it that (China) is probably going to try and roll them because they don’t want to bring (soybeans) in at the moment and pay an even higher price than they did the first time,” Swenson said. “So that’s probably going to be an adjustment of what we see on demand.”
The big unknown is African swine flu (ASF) which has greatly diminished the Chinese hog herd. Six months ago it was rumored that ASF was responsible for a couple percent loss, but the loss is thought to be much greater now.
“The Chinese hog market has now probably taken out over 30 percent, pushing to 30-35,” Swenson said. “That’s the one people are trying to pin down and so we’ve got a lot of pull back on soybean meal demand.
“We’re not really convinced, yet, because we think it’s hitting a lot more of the more rural producers that really aren’t on strict, defined, regimented diets and following really good rations, so we don’t think it’s going to be as much as they expect,” he said. “But there will be some scaling back – it’s been a real long-term solution, it’s not a short-term solution. They’re going to have to sort this thing out and try and work through it as time goes on.”
The U.S. season-average soybean price for 2019-20 is forecast at $8.40 per bushel, unchanged from last month. The soybean meal and oil price forecasts are also unchanged at $300 per short ton and 29.5 cents per pound, respectively, according to the WASDE report. Changes for 2018-19 include reduced soybean crush, reflecting lower domestic use and exports of soybean meal.
Soybean ending stocks are projected at 1.07 billion bushels, up 20 million.