Soybean

As harvest approaches and the market and producers keep a close watch on the weather, soybean prices remain lackluster. What kind of crop producers harvest is still in question given the struggles the crop has endured this year.

It has been a year of struggles for both soybeans and corn, and both commodities are dealing with similar issues, notably weather and trade, according to Frayne Olson, grain marketing economist at North Dakota State University.

“We’ve got our hands full with both of those. We’re watching the weather,” Olson said, adding that one of the big takeaways from recent crop tours is that the soybeans are just as far behind as the corn.

“Up until recently, the focus was on corn, corn development and corn planting progress, but the soybeans are also behind, and of course, soybeans are going to be a lot more susceptible to a frost and frost damage than corn would be,” he said. “It takes a lot colder temperature to take corn out. Soybeans are a lot more sensitive to frost and potential frost damage.”

Weather in the Corn Belt in general has been pretty favorable for crop development for both soybeans and corn, but in the back of everyone’s mind is what’s going to happen with frost and when is that going to hit.

“Nobody is getting terribly excited because we don’t have any frost news right around the corner,” he said. “Both corn and soybeans are pretty vulnerable to even a normal frost and so we’re kind of in this phase where even though we have markets moving up and down, there doesn’t seem to be any major shift in direction.

“At this time there isn’t a lot of new fundamental supply and demand news that everyone is trading off of. We’re looking toward the other markets. Short-term we’re on this uneven status right now,” he said.

Soybeans have been trading in a very narrow trading range. Cash soybeans for harvest delivery were $7.40-$7.45. At one local elevator in west central Minnesota regularly followed in this column, as of Sept. 4, the September cash price for soybeans was $7.60 and basis was $1.05 under. December 2019 cash price was listed at $7.74 and basis was $1.05 under.

Things have been relatively quiet in recent weeks because there hasn’t been a lot of new news to move the market, even though China increased the tariff on U.S. soybeans from 25 to 30 percent as of Sept. 1. One would think that would have a big impact on prices, but that wasn’t the case.

“(China is) not buying any soybeans from us to start with, so it really wasn’t new news,’ Olson said.

That doesn’t mean it’s something the market and producers should ignore, even though things are kind of quiet in the world of agriculture.

“The market still needs to trade and the market is more interested in news and the focus then turns to outside of agriculture and we start looking at what’s happening in other markets,” he said. “Obviously what’s happening in the commodity markets, like the energies, is important, but also the equity markets.

“There are times when what happens in the general economy or what’s happening in the energy markets tends to have a large impact on the psychology of the ag markets,” he continued. “There hasn’t been a lot of shocker news, but there hasn’t been a lot of new ag specific stuff coming into the market place, which means we’re kind of looking toward other markets for direction. And that, again, is what continues to put some of this negative tone into the grain markets.”

Concern about bigger global issues, like a slowing world economy and what’s happening in the U.S. economy, take a much bigger role in traders’ attitudes, according to Olson, and that’s kind of where we’re at right now.

One of the global issues Olson said farmers should be thinking about is the stability of the Argentine economy as there is more and more concern being raised about this.

“Argentina has had some very high inflation rates; the value of their currency has dropped substantially,” he said. “Normally, when we talk about low currency values we think all this is going to mean a lot of competition, and that’s possible.

“But under this environment, as an international buyer you’re worried about the stability of the company you’re buying from,” he continued. “You’re also worried about the stability of the government and so there are some red flags going up right now about what’s happening in Argentina and how that might impact their ability to not only be able to sell soybeans, but also process soybeans and sell meal because Argentina is a big producer of soybeans and meal.”

Brazil and its economy is not in a lot better shape, but right now everyone is more focused on the problems coming out of Argentina.

“Of course, that may have some spillover effect into how competitive U.S. soybeans are relative to what’s happening in Argentina and Brazil,” he said. “It’s one of those issues on the horizon that may be getting more discussion and people may be talking about more in the future.”

Moving forward Olson feels things will get a bit more exciting in the next few weeks. One reason for the excitement is the next World Agricultural Supply and Demand Estimate (WASDE) report that USDA will release on Sept. 12.

“We’ll get an update on quality; we’ll get an update for the production estimate with yield numbers,” he said. “Now these are still estimates, but at least we’ll have field observations, as well as farmer surveys, so there is kind of an expectation that the yield numbers may start dropping. We’ll have to wait and see.”

One other thing to look for in the WASDE report are the inventory numbers. Each quarter USDA estimates how many bushels of corn, soybeans and wheat are still left in the bins and those September numbers become the ending stock number for the final four quarters.

“Those usually aren’t shocking numbers that provide a lot of price movement, but as we close out the marketing year for 2018 those ending stock numbers become that reference point, that number that says, ‘okay, we’ve got to rebalance,’” he said. “We’ll start putting in numbers for exports and for crush for 2018 and that again kind of sets the stage for oil. What does that mean for 2019? Because I know we’re going to have a lot of soybeans left over. There’s going to be a lot of soybeans left in the bin.”

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