One commodity market expert advises growers not to leave a lot of soybeans unpriced. At the end of this marketing year the US could have up to 900 million bushels of soybeans on hand. Brazil’s harvest is heating up, and it’s looking to be a good year- but not quite as good as once predicted. An Ag economist says that our biggest pricing concern is China. Even if we are able to make a trade deal with China, it’s too late to fill that gap. Given the somewhat grim outlook, soybean fundamentals remain bearish.
Kevin McNew of Ag Web says that the soybean harvest is heating up in Brazil. Harvest in Brazil’s second-largest soybean producing state, Parana, has now reached 25%. That’s significantly ahead of last season. Only 6% of the state’s soy fields are in bad condition, 24% are average condition, and the remainder are in good condition.
It’s looking like some of Brazil’s weather issues haven’t been bad enough to really put any kind of major dent on their production. It won’t meet the record-high estimate of 122 MMT, but it’s looking good. Argentina is expected to have a good crop of soybeans this year as well. Last year’s crop was 38 MMT, this year will likely be between 53-55 MMT.
Ken Anderson of Brownfield Ag News reported on February 5th that Market consulting firm INTLFCStone has made another reduction in its estimate of Brazil’s soybean crop.
Arlan Suderman INTLFCStone’s chief commodities economist shared the development.
“We lowered our production estimate from our Brazil team to 112.2 million metric ton, down from 116.3 million metric ton last month. USDA’s latest estimate was all the way back in December, at over 122 million metric tons.”
Last year, Brazil had a record soybean crop of nearly 120 MMT. This year will likely be less due to dry weather. Harvest there is about two weeks ahead of schedule.
Pricing Issue is China
Tom Steever of Brownfield Ag News argues that Brazil’s not the issue. He spoke with agriculture economist Todd Hubbs, and Hubbs says that China is our number one soybean pricing issue. If it was looking like Brazil was going to have a bad soybean crop, that would be one thing. But right now, the main issue is China. We just need more trade with them. Hubbs said,
“We may see exports go up a little bit from this year, but we’re going to have plenty of beans in the world. So for us here in the U.S., I think [China trade is] issue number one for soybean prices.”
He estimates the price of soybeans for the coming year to be around $8.40. And he predicts that there will be plenty of soybeans to go around. He anticipates that 2019’s projected soybean acreage will overshoot what’s needed by over 10 million acres. Hubbs believes that around 75 million acres will produce all the soybeans we need in 2019.
Then there’s always the possibility for production issues and changing Chinese demand.
“That trade deal has a huge amount of uncertainty and could change our consumption quite a bit,” Hubbs told Brownfield Ag News Friday.
Export Sales Announcements
Kevin McNew of AgWeb announced the US export sales of soybeans. As of February 6, 586,000 metric tons of soybeans were slated for delivery to China. Of that total, 523,000 metric tons is planned in the 2018/19 marketing year and the remainder is planned for 2019/20. There was also 182,000 metric tons of exported soybeans headed to unknown locations during the 2019/20 marketing year.
Soybean Markets Lack Coherence
Bryce Knorr of Farm Futures says that soybean markets are defying logic right now. In the Weekly Soybean Review, Knorr says fundamentals are still bearish as charts are trying to turn.
There are a few helpful factors happening right now. Brazil’s soybean crop is somewhat smaller than had been anticipated, China is buying and taking delivery on some US soybeans again, and a Chinese trade deal might still be happening. We’re hopeful.
However, even with current shipments, US soybean exports are going to be down by around 550 million bushels. That’s certainly not an amount that we can make up for in one single year. It’s too large.
It’s looking like the US will have 900 million bushels of soybeans on hand when the marketing year ends August 31. Export demands to China may pick up once again, but for the long term, China isn’t anticipated to stay at the same level of growth. Their population is aging, the economy there is slowing, and they are making fundamental changes to the protein levels in feed for their hog industry.
As a result, even the reduction in acres we found in our recent survey may not be enough to keep ending stocks from nearing 1 billion bushels 18 months from now. The wild card, of course, is weather, after an unprecedented six years in a row of above normal yields.
Due to that uncertainty it’s not unusual for November futures to hold up into the growing season, even in years of bearish supplies. But both November and July are tracking bullish patterns of higher lows after bottoms were put in last fall. That has old crop on the verge of a breakout that could keep prices rising into spring, and perhaps beyond.
Take the Money and Run
Knorr advises that soybean growers should not leave too much inventory left unpriced. Thanks to the Market Facilitation Program and higher soybean prices last spring, many farmers are able to get by.
There’s no shame in taking the money – and running.
As for the new crop, soybeans are at unprofitable levels for the average grower. There’s also weak basis. Despite this, the ratio of soybean to corn futures, now favors soybeans. That could be attracting more acres, which isn’t really what we should be seeing right now. It will only make things worse next year.
Be sure to check Ag Nook’s related story titled, “Red-Hot Soybean Acre Predictions“.
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