Who farmers choose to listen to will greatly influence their perspective about the size and value of this year’s soybean crop. As harvest season begins, the U.S. Department of Agriculture’s World Agricultural Supply and Demand Estimates (WASDE) released Sept. 11 did little to add clarity to turbulence in the grain trade.
 
“This is an adjustment period,” said Grant Kimberley, Iowa Soybean Association director of market development. “Nothing on the horizon says we’re going to have a dramatic turnaround in prices, and two back-to-back years of record global production is driving that.”
 
Kimberley expects the harvested acres numbers, which have not changed since August, to shrink due to wet weather across the state.
 
“Rain makes grain to a certain point, but as farmers know, too much precipitation makes mud and disease,” said Kimberley, who farms near the central Iowa town of Maxwell. “Disease has come on strong in the last couple weeks in certain pockets. That’s not always easy to see from the road but could add to the variability of yields farmers notice when harvest gets rolling.”
 
Oilseed consultant John Baize was not surprised at the projected soybean numbers. He’s seen quality soybean fields, particularly in northwest Iowa – perhaps some of the best he’s ever seen.
 
“I think yields are high and we’re going to have a big crop,” Baize said. “The problem will be next year. South America had a big year as well and Brazil is exporting beans at a record pace.
 
“How are we going to move these beans out of the U.S. the next 12 months?”
 
Kimberley said China will continue to be a buyer. How much? That’s the billion-dollar question.
 
“While China’s economic growth has slowed, it’s still growth,” he said. “Keep in mind that even a five percent growth in China’s economy is still nearly double the growth expected in many other developed nations.”
 
But demand isn’t enough to keep prices above breakeven for U.S. soybean farmers.
 
Domestic grain prices are being pressured by the strong value of the U.S. Dollar in contrast to the weakening Brazilian Real.
 
“The combination is being felt by U.S. farmers in the form of lower soybean prices,” Kimberley noted.
 
Baize said if today’s yield and production estimates are correct and Brazil’s currency devaluation continues in combination with the strong U.S. Dollar, soybean prices could dip below $8 per bushel.
 
“The real crunch will come in February when Brazil’s harvest begins. In the meantime, poor weather conditions in key growing areas or a decline in soybean plantings in Brazil brought on by farmers not wanting to plant a crop that they’ll lose money on could change some of the dynamics.
 
“If we want to sell this crop, we’ll have to get down to an even more competitive price than Brazil,” he added.
 
Kimberley says that the net effect of market reports and forecasts is that fixed and variable costs will need to decline.
 
“No one is expecting a significant pop in grain prices any time soon,” he said. “So farmers will need to cut back expenses for the foreseeable future.”
 
A closer look at the WASDE numbers:

  • U.S. soybean production is 83.5 million acres, unchanged from August forecast.
  • U.S. soybean export increased by 10 million bushels to 1.835 billion bushels.
  • U.S. soybean yield is 47.1 bushels an acres, up 0.2 bpa from August.
  • U.S. soybean for 2015 ending stocks are projected at 210 million bushels.
  • The soybean domestic ending stocks outlook for the 2015/16 crop year was lowered by 20 million bushels to 450 million bushels, reflecting a cut to beginning stocks as well as increased demand from crushers. The 2014/15 soy end stocks view was lowered to 210 million bushels from 240 million bushels due to higher exports as well as crushings.
  • Globally, USDA lowered ending stocks to 85 mmt, down 1.9 mmt from last month, on reduced production in Ukraine and Canada. USDA also lowered old-crop ending stocks to 78.7 mmt from last month's estimate of 80.6 mmt.