Soybean producers hoping for a big boost to prices following the signing of the Phase One trade agreement between the U.S. and China were somewhat surprised, and frankly, disappointed as prices actually dropped instead of going up.
And now, with the coronavirus that began in China, markets have shown concern and that has helped keep a lid on prices, as well.
“Soybeans were the biggest blind side after that China tariff agreement was reached,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn. “Soybeans went down hard and they really haven’t rebounded yet.
“And now that we have the coronavirus, China has asked for flexibility in meeting those trade agreements, so everyone’s a little bit skeptical at this point,” she continued. “I know there’s big numbers involved, they’re supposed to buy lots of ag products in this Phase One deal and it’s supposed to include lots of purchases. But there is a special provision in the Phase One deal if there is an unusual circumstance, such as a health crisis.
“So this Phase One deal, we’re just going to have to wait that out a little bit longer to see if anything bullish comes from that,” she added.
As a result of the current circumstances and the nearly two-year long trade war, soybean export sales have suffered.
“Export sales are still not good. Now, it was kind of exciting as China was still the number one destination for U.S. soybeans last week, so they are buying some, but it’s just not as much as what we had hoped,” she said.
“Soybean farmers cannot catch a break this year. We finally get the tariff (agreement) signed and then we get coronavirus, so it’s going to be a struggle for soybeans, especially for old crop. New crop, it’s hanging in there, but it’s still not real enticing,” she added.
Old crop soybean has definitely taken it hard. Prices are down a good 50 cents from where they peaked. New crop soybeans are looking at a futures price at $9.19, so locally, producers are looking at $8 cash, which is not really enough to get anyone excited about selling, Jensen noted.
“We are looking at old crop right in that $7.75 range, so there’s just not a whole lot of excitement in selling soybeans either,” she said. “We did get up close to $8.50 cash, so we did have a good, quick rally before the China Phase One agreement was signed, but then the market sold off after the agreement was signed.”
Jensen, along with most producers and others in the industry thought the result of the Phase One deal was going to be just the opposite, and that prices would go up, but that didn’t happen.
“We thought we were going to go up 20 cents and instead we went down 20,” she said.
At one local elevator in west central Minnesota regularly followed in this column, as of Feb. 3, the cash price for soybeans was $8.03 and basis was -77 cents under. July 2020 cash price was listed at $8.26 and basis was -78 cents under.
It may be a bit too early to make any predictions about spring planting, but when considering whether to plant corn or soybeans this year Jensen gives the edge to soybeans. She said that when considering the ratio of prices, soybeans have a little bit of an advantage, mostly because of the lower cost.
“How much money do you want to put in the ground to lose this year? Soybeans look like they’ll lose less (than corn), if that’s a good way of saying it, but we’ve got a long way to go before spring, so things could definitely change,” she said. “I’ll encourage guys to kind of watch the battle between corn prices and soybean prices for 2020 acres.”
As for recommendations for farmers as to what to do with their soybeans, Jensen couldn’t offer much.
“No, I don’t think there’s really any sales opportunities for soybeans. The only thing that I could recommend right now is just check your bins,” she said. “There were lots of problems. Harvest did not go well and a lot of the crops were wet. So make sure your bins are staying in condition when it comes to soybeans.”