The US has reached a tentative trade deal with China. They’ll once again be buying US agricultural goods. For many US farmers this news is welcome relief. We’re expecting soybean sales to boon, but right now it’s a waiting game. China has been vague, and right now we’re waiting for the country drop the tariffs before the transactions take place. Buyers and analysts believe that no significant purchases will be made with the 25% duty still in effect on corn, soybeans, sorghum and wheat.
Not a Typical Year
During typical years, farmers harvest their beans and sell them right away. Not this year. This year they’re storing soybeans- almost anywhere they can find a place where its safe and dry.
Storing soybeans is risky. Most are hoping that with the ease of trade tensions with China and some futures trending higher for next year, that this is the correct plan of action. Hopefully holding out for higher prices is the correct call. But there are other risks. Soybeans don’t always store very well. Not like corn. They need to be kept very dry, or they will rot quickly.
For many, there really want’ much of a choice to make. With the onset of the tariffs, Chinese imports of soybeans plummeted- falling almost 90% since last year. Millions of bushels of US soybeans are left with nowhere to go. Chief executive of Bunge Ltd, the world’s largest soybean processor said,
“I’ve heard farmers and commercial companies putting corn and soybeans into tool sheds and caves.”
Storing soybeans was and continues to be the best option. Kevin McNew with Farmers Business Network spoke to Brownfield Ag News at the NAFB Convention in Kansas City. McNew is an Ag economist, and provided advice.
“You have to store your way out of it. You’re going to see basis improvements. If we get a resolution to the China issue, you’ll see upside in the futures markets. The best way to do that is through storing beans.”
McNew’s prediction for 2019 isn’t very optimistic. Due to the above average South American soybean crop and El Nino weather pattern, he doesn’t anticipate significant price increases. As more of the details of the tariff truce between the US and China come out, that could change.
Adjusting to Markets
Peter Scharpe of Minnesota Farm Guide also discussed the challenges US soybean growers are facing with storage this fall. According to Ag Update, he spoke on the phone with Bob Zelenka, the executive director of the Minnesota Grain and Feed Association. Zelenka said that the market changes have forced soybean growers in Minnesota to change their grain storage strategies.
“A lot of farmers are trying to find every square inch of storage space that they could use, particularly for soybeans because they’re going nowhere.”
This has been a tough year to store soybeans. Not only has space been tight, but the harvest season was wet. Many harvested beans were high in moisture, and needed to be put through a dryer. That’s unusual.
Soybeans going through a grain dryer has a higher risk factor than corn. Beans often come out of the field dirtier than corn with pods being mixed in the grain. Soybeans also have an oil factor that corn does not. The combination of pods, excess dry matter and oil creates a fire risk inside a grain dryer.
Hopefully, all these soybeans won’t be in storage for much longer. Zelenka said,
“Certainly, once those tariffs are taken off, you are looking at two to three months before you get the logistics back in place to line everything up for efficient movement of grain back into those markets.”
There’s a risk that the US will not be able to have the same amount of market share in China that it once did. The Chinese have been working hard to minimize their dependency on US soybeans. They’ve cut back on protein in their feed, looking at canola meal substitutes and sourcing it from India.
There are so many unknowns. The trade truce with China is good news, but will it last? Will the US be able to recover their soybean markets? Hopefully so. Maybe US soybean farmers won’t have to store their soybeans much longer, and we can end this unusual year in a much better place than many were anticipating.