Just as with corn, soybean prices improved slightly as 2019 was drawing to a close, and producers were hoping the rally would carry over into the New Year.
“Soybeans have seen some decent movement, just like we have in corn. We’ve had a nice rally,” said Randy Martinson, president of Martinson Ag Risk Management, Fargo, N.D. “We’re up above $9 in all the contracts.”
At one local elevator in west central Minnesota regularly followed in this column, as of Dec. 23, the January cash price for soybeans was $8.66 and basis was -66 cents under. July 2020 cash price was listed at $8.80 and basis was -85 cents under.
Part of the reason for the rally is because of the news regarding a trade deal with China that is expected to be signed in January.
“Phase one is done with the trade deal, and even though it’s not signed, it is going to show some good demand. We’ve been hearing rumors that China has been in buying somewhere between 7-9 cargos of soybeans,” he said on Dec. 20. “We’re hearing rumors every day that a few more are being bought, so we do know that the demand is switching over and that we’re getting some of the Chinese business.”
The thought is that China is buying from the U.S. because of a little bit shorter lack of supplies coming out of South America where growers are in the planting mode. In the southern half of Argentina there are still some concerns regarding dry conditions.
“The forecast is for rain coming into that part of Argentina, which puts a little bit of pressure on soybeans of late, but if the rains don’t materialize and aren’t as strong as they expect we would expect that soybeans are going to gear back up again,” Martinson explained.
“Argentina was supposed to get rain over the weekend before Christmas, and if they do, it’s going to help their crop,” he continued. “But if the rains are less than anticipated, that will bring some support back into the market because their production is going to be a little bit short on the soybean side if the hot and dry conditions continue, especially over the southern half of the country.”
Because of the concern with the heat, Argentina is already starting to lower their corn production estimates, which is helping with the U.S. as well because we could get some more of the export demand on the corn side.
“We’re also seeing, because of the new government coming into Argentina, they’ve increased their export tax for wheat, corn and soybeans which also brings a little bit more of the demand towards the U.S.,” he said.
“In all, we’ve got some friendly outlook as far as beans are concerned, but it’s all going to be dependent on the specifics of the China/U.S. trade deal. That, I think, will give us a little bit of a bounce,” he added. “But I think it’s going to be short-lived because usually by February we start moving our export market to South America and I don’t think this year is going to be any different.”
Martinson also noted the trade agreement with Japan that was signed a while ago and ratified by Japan might have a little more to do with help for the soybean side of things, “but in the big picture it’s China and the fact we’re going to be getting that trade deal done and that’s going to help the soybeans.”
After approval in the U.S. House of Representatives in December, the U.S. Senate is also expected to sign the U.S.-Mexico-Canada (USMC) trade agreement in January, although Martinson said it is not expected to make much of a difference for soybeans because those two countries aren’t “big” buyers of U.S. soybeans.
As the end of the year was drawing near, Martinson noted another thing producers can look to is the upcoming supply and demand report from USDA in January.
For both corn and soybeans Martinson expects that harvested acres will be lowered a little bit because many producers planted some crop on their cover crop acres just to get in for government program reasons.
“We expect harvested acres to be dropped a little bit, and because of the late harvest and the trouble with harvesting in the Northern Plains, I expect yield will drop down too,” he said. “Quality is going to affect more on the corn side because of the lower test weight, so that will affect yield a little there. But with soybeans I just think there was some crop that was not harvested and we should see a little bit of a reduction in yield because of that.
“In all, we’re looking for harvested acres and yield to come down a little bit. I would not be surprised to see USDA increase crush for soybeans some because crush numbers have been coming in fairly decent,” he added.
As the end of the year was drawing near, Martinson offered some suggestions for producers to consider.
“I’m telling guys, if you need to sell for cash purposes, look at buying February calls because I don’t think we need to own soybeans that long,” he said. “But certainly, once the January report (from USDA) comes out, and the specifics of the trade deal get done, we’re going to want to be sellers not long after those numbers get released and if we see a little more push in the market.
“I’m short-term friendly, but long-term I’m a little bit bearish,” he concluded.