Typically this time of year South America is dominating the world soybean market as the top source for worldwide buyers. But this year things are a bit different with many buyers finding their way to the US for soybeans.
One of the big reasons for this anomaly is that the soybean crop in Brazil had some issues this year because the weather conditions were too dry, which affected the quality and yield. USDA has already indicated in its monthly supply and demand reports.
“They had problems in Brazil, they didn’t have a bumper crop. The rainforest was a drought and that’s not something we see very often, “said Betsy Jensen, Northland Farm Business Management and a Producer / Marketer from Stephen, Minn.
“I don’t know if it’s a surprise, necessarily, but it has been confirmed that South America didn’t have a crop that we had anticipated last fall,” she added.
And while Brazil is still a major supplier of beans, the result of a smaller than expected crop is that Brazil is not selling as many soybeans and the US is seeing more sales than it normally would at this time.
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“It’s pretty unique how the US is continuing to sell soybeans, which is not something that happens very often,” she said, adding that in April the USDA increased its US soybean exports estimate slightly.
“Our exports are hanging in there. We should not be exporting soybeans right now. It should all be going to South America, “she continued. “(Brazil is) trying their best … and certainly aggressive when it comes to exports … but they just can’t meet the demand and so buyers are still coming to the US so keep that in mind. We still have great export sales in soybeans, even though it’s almost May, and that’s not something we see very often. “
Most of the US sales are still going to China.
In addition to the slightly surprising demand, Jensen said the soybean market also “kind of got blindsided” in the palm oil market in the latter half of April by a crisis.
“There’s a palm oil crisis, but I’m not settled on what’s going on,” she said. “(First) ‘there bans on exports … no, wait a minute, there is no ban, oops there is a ban.’ There is a lot of uncertainty right now, and the palm oil market is huge.
“We don’t look at it that much because we don’t trade palm oil, but it does have an impact on the soybean market. So there were a lot of headlines last week about the soybean market about palm oil, “she added. “I’m still not sure how that ‘s going to be working. It’s something to think about, something off in the distance that we didn’t expect to happen. But it kind of blindsided us when it comes to soybeans. Keep in mind that palm oil is also an effect when it comes to soybean oil prices. “
That said, Jensen said his biggest concern right now is with soybeans in the Northern Plains because if farmers have soybeans in their bins, the basis for getting tenders is very poor.
“Unless you’re living next to a crush plant, our basis tends to get very poor, because they typically don’t book the shuttles of trains going out west or west,” she said. “So if a farmer does have soybeans in their bin, we want to make sure you’re telling your elevator manager or grain buyer how much you have because they may not have much of a home, and (the grain buyers) might actually Stop bidding on old crop beans significantly earlier than you anticipate.
“So… make sure you are aggressive in trying to get those soldiers. Even if you deliver them to the elevator, get a fix because at a certain point they’re going to stop the old crop and they’re just going to start bidding on the November contract, “she explained.
“Look at the market. If we switch from old crop to new crop, that is a $ 1.50 drop and you do not want to take a $ 1.50 drop in your soybeans one day, “she added.
Looking at local prices, Jensen said in her area, which is not near a crush plant, beans are bringing in $ 16 a bushel and under-75 cents, which is a much more common basis for this time, but certainly less than what producers saw. Last fall when basis was -10 cents under.
“So the basis is definitely weakening, and it’s kind of indicating that local elevators aren’t interested in buying old crop. They have enough wheat and corn to move through their system, “she said. “If you are in the Northern Plains and have a large amount of soybeans, I would be concerned about holding those cash beans.”
At one local elevator in west central Minnesota regularly following this column, as of April 26, cash soybean prices for May delivery were posted at $ 16.40 and the basis was -45 cents under. The November 2022 soybean futures price was listed at $ 15.03 and the basis was +9 cents over.
When it comes to producers marketing soybeans, Jensen is “very nervous” about the old crop and the local market and advised producers who are old crop to talk to their buyer.
When it comes to new crop beans, she said prices are over $ 14 cash off, which is a convenient thing to have.
“That’s something I definitely think farmers should be looking at,” she said. “I would never have imagined we would have that strong of a bid. Also, the basis for the new crop beans is pretty good, as well, so you can just do a cash contract. I wouldn’t hesitate to do a cash contract off the combine. “
In the near-term the market will be watching the weather and planting progress. Recent cold, snow and rain events have caused delays in planting across the northern Plains, which could have led to changes in planting decisions.
Corn planting progress is especially going to be watched closely because often times when producers can’t get corn planted in a timely fashion they will switch to it.
“I don’t know if that will happen, but we’re going to watch corn planting progress if any acres are going to switch to soybeans,” she said.
One last item for producers to keep a watch on is the volatility of the corn and soybean markets, though soybeans are the most volatile at this time, according to Jensen.
“They go up and down. The markets are not trading together, “she said. “Farmers have to watch the corn market and the soybean market because they are frequently trading in the opposite direction. It’s an unusual time, so keep that in mind. “
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