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Market Outlook: Soybean Exports Show Strength Despite Bearish Market Tones

07:53AM Oct 29, 2014

Amid the present bear market, there’s at least one positive note for soybeans, says Sue Martin of Ag and Investment Services.

“I think what we’ve got is a pretty awesome export book started on soybeans,” Martin tells the “U.S. Farm Report” Marketing Roundtable. Now, the question is whether South America will produce a mega crop with negative price implications for U.S. producers. Farmers in the southern portion of the continent have experienced weather that’s too wet, whereas farmers to the north have experienced dry conditions. 

Meanwhile, political decisions could also move markets. “In Argentina, the government’s changing some laws, and they’re really entertaining the thought of forcing the farmer to have to sell his soybeans,” Martin continues. “If that happens, that’s going to come into play because we’ve been enjoying all of this wonderful demand from soybean meal for the crush because they’ve been absent, more or less, in our world market.”

South America could indeed place pressure on the price of soybeans, though there are hopeful notes, agrees Rich Nelson, Allendale.

“What I do like for…now is that China does have good crush margins. They’ve actually responded very well from the very low numbers we were talking about back in August. Part of that process, like Sue did mention, we’ve got great exports so far. As long as we can pack these exports into the next two or three months, I think we can actually do OK as far as U.S. numbers. For the South American impact, we’ve got nothing but of course large supplies coming down the road.” 

Market Around Yield Surprises Found This Fall in the Field

Surprises in the form of weather and market volatility are nothing new to producers. Yet what approach should farms take when yields prove unexpectedly high on a crop such as soybeans? 

It all depends on your storage situation, explains Brian Roach, Roach Ag Marketing. On “AgDay TV,” he walked through a hypothetical case in which a farmer expects soybeans of 45 bushels per acre and ends up with soybeans of 70 bushels per acre.

“The best situation is if you have on-farm storage and you’re OK on cash flow, put it away,” Roach tells “AgDay.” “Keep in mind you’re looking at selling revenue even though you’ve got $9.20 to $9.50 cash prices. That type of revenue will still make that a profitable sell, 
in most cases.” 

When extra yields become reality, focus on covering cash flow, he advises.

“Put it in the bin and look to do something in the springtime when South America has very little risk premium in this market,” Roach says. “I think it will give us some risk premium as we head into January and February. It might not be as much as usual, but expect that there will be some sort of lift in prices.”

As for a crop such as wheat, market conditions are a bit more complex.

“We’ve got a headwind with the dollar...and I don’t think that’s going to change,” Roach explains. “Look at double-cropping opportunities where they exist. Be very aggressive with what you’re doing about pasture ground if that makes more sense.”