Farmers may feel anxious over recent dips in soybean futures, and bearish summer weather forecasts, but they shouldn’t worry. Why? Because of export superstar China with its continuing strong demand, according to Rich Nelson, chief strategist for the marketing firm Allendale, in McHenry, Ill. Here are six takeaways from Allendale’s latest soybean market outlook.
1. Bet on good weather and plenty of rain. "There is intense rain lined up for the soybean region and good moisture and temperature,” Nelson says. “The only issue we’re looking at … is what kind of weather is lined up over the next three weeks.”
2. Expect a bumper soybean crop. “It’s still a very good crop as far as crop numbers go,” Nelson says. Allendale’s estimated yield of 46.1 bu. per acre (to factor in heat damage) compares with the USDA estimate for yield of 46.7 bu. per acre. USDA’s production estimate of 3.880 million bushels is up 80 million bushels from last year.
3. Be prepared for continuing strong demand from China. Its expanding economy is driving demand for soybeans. “The numbers of what they eat per capita are till slowly increasing," Nelson says. This year, it’s five percent more than last year, even though it’s the weakest growth rate in four years by China, he explains. China’s soybean imports are up 13% this year, he notes.
4. Brace yourself for some cancelled sales contracts at the end of the marketing year. With sales of 1.898 billion bushels, “we have sold so much ahead of where we need to that we’re all kind of scrambling to try to figure out what may actually get shipped out …” Nelson says. Towards the end of August, sales that didn’t get shipped out will be cancelled or transferred to new crop, he says. Already, more than 264 million bushels has been exported.
5. Be thankful for South America’s bad weather? Even though production in Brazil and Argentina is expected to increase by 1%, the U.S. is offering China soybeans at a better price, according to Nelson. Production in both countries has been hurt by bad weather.
6. Expect a rollercoaster ride as prices of soybean futures decline, then rise. November soybeans are expected to fall just under $9.50. “You often see lows in August or September, sometimes in July,” Nelson says. “But expect a resurgence after these fall lows,” he adds.