After months and months of a doom and gloom outlook, things might be taking a turn for the better for the soybean market.
For much of the past year and a half or better, the soybean market was in the doldrums as the trade war with China marched on with both countries levying tariffs against each other. Exports of U.S. soybeans were lagging far behind the previous year and ending stocks were piling up in farmers’ bins. Now, although the market still isn’t being considered bullish, it is looking a little friendlier.
“It’s amazing how the soybean story has turned from being one where we were looking at a billion bushel carryout and a bearish situation, to it improving to be a somewhat friendly situation and a 450-460 million bushel ending stocks estimate,” said Randy Martinson, president of Martinson Ag Risk Management, Fargo, N.D. “So it’s kind of amazing how that story has changed so fast for the soybean market.”
Part of the reason for the friendlier outlook is the fact an early winter snow storm that moved through the region and is impacting roughly 18-20 percent of the soybean production in North Dakota, South Dakota and Minnesota, Martinson noted.
“It’s about 650 million bushels that are being impacted by this and it’s likely we could lose 10 percent in the soybeans,” he said. “That would equate to about 65 million bushels which could pull down our stocks to 400 million. Now, all of a sudden, we’re getting close to a little bit more of a friendlier situation for soybeans.”
Largely because of the snow storm and delayed harvest, Martinson feels the market will see a decrease in soybean stocks going forward in future USDA reports.
“I just expect that production estimates will continue to decline in soybeans, like in corn, as we go through the late fall and early winter period,” he said.
Another part of the reason for the friendlier outlook is that it looks like a deal to end the trade dispute between China and the U.S. may be in the works.
“There’s still a lot of unanswered questions and a lot of unknowns with the China deal, but at least we’re talking.” he said. “And it sounds like (China is) going to come in and buy close to 30 million metric tons this year which is going to be more than they bought last year and it will certainly help chew through some of our stocks that we have.
“So soybeans have turned from being a bearish market to one that’s looking somewhat friendly,” he added.
Another factor benefitting the market, Martinson pointed out, is that the delayed harvest in the Northern Plains is helping with the basis, not only for soybeans but with corn also.
“Our basis levels have improved nicely,” he said, explaining that trains are sitting at the elevator waiting for beans, which they won’t be getting right now because of the delayed harvest, so they’re having to improve bids to try and get beans and that’s helped the cash situation in the bean market.
Besides the weather and the delayed harvest here, the market will also be keeping a close watch on South America where dry conditions, especially in Brazil, may cause planting delays. There are already harvesting delays there, and further delays will then push back planting progress, which could be beneficial for the U.S. soybean market.
“(Brazil is) going to see delayed harvesting. They’re not going to be harvesting into February like they have been in the past. They’ll likely be into the late February, early March time frame and then we’ll start losing our exports again,” Martinson explained. “But if the dry conditions continue to prevail in Brazil, it will cause a little bit of a production cut in South America, which will help encourage a little more buying of U.S. beans.
“Right now, I think we probably could see the bean market rally into spring and then fade unless the situation in Brazil gets a little bit more dire and then we could see things carry out a little bit longer,” he continued. “It’s going to be dependent on the demand and where the exports are and that’s the big thing that we’re waiting on.
“We’ll be able to react more once we know more on what the China deal is and how concrete it is for demand, and that’s really what’s going to help drive the soybean market,” he said.
At one local elevator in west central Minnesota regularly followed in this column, as of Oct. 15, the November cash price for soybeans was $8.50 and basis was 85 cents under. April 2020 cash price was listed at $8.65 and basis was $1.02 under.