Market Update with Chip Flory
China and South America Will Sway Winter Soybean Prices
If weather and crop development in Brazil are progressing as expected, growers there will move a significant amount of new-crop soybeans to port this month. By the end of January, Brazil will be back in the soybean export business, and China will turn its attention back to South America for supplies. Brazil is expected to produce a record crop of 102 million metric tons (MMT), according to USDA’s World Agricultural Supply and Demand Estimates report Dec. 9. That’s the mid-point of trade expectations. Some anticipate production of at least 103 MMT and few expect the crop to dip below 101 MMT. Yet last year at this time, expectations were similar. Then production slumped to 96.5 MMT after late-season drought hit northern production areas. The cut led to a surge of Chinese demand for U.S. soybeans. China will remain an excellent soybean buyer, even under the Trump administration. Its economy has bottomed, manufacturing is building and inflation is rising. Chinese consumer demand for meat will expand in 2017, and that means bigger feed demand and increasing imports of beef, poultry and especially pork.
U.S. soybean shipments will slow in January, but shipments from February through April are expected to be lean. That points to pressure on soybean prices heading into the planting season. If end-of-2016 market economics have you looking to increase soybean acres in 2017, be sure to lock in price protection on those expansion bushels.
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By Nate Birt
Ask an Analyst: Kevin Duling | KD Investors
What is your commodity marketing philosophy?
I bring things to an individual level. I start with what will work for their operation, what their numbers are and their balance sheet. My philosophy is two heads are better than one, and together we can make a good decision versus me dictating a plan.
What distinguishes your consulting firm from others in agriculture?
I speak the farmer language because I am one. I started my career on the production side. I understand and share the same psychological battle they do versus a lot of analysts who have never grown a bushel of anything. I’m based in north-central Oregon near Maupin. My clients go all the way from the Eastern Standard time zone to central California.
What’s one action every producer should take to manage commodity marketing risk?
Understand what your costs are, and give the market a chance to exceed your break-even levels.
What percentage sold should farmers be on their crops?
We’re 80% sold on soybeans as of early December. We did a lot of contracting on that big run this past spring. The remaining 20% we will leave until spring or summer 2017. With corn, we forward-contracted 40% to 50%.
Which marketing tool is most underappreciated?
The ability to buy back different grains you raise. Corn-growers who sold at harvest might buy back wheat, which has more upside.
Who is one expert whose business advice you respect?
My friend Al Conway is CEO of Cascade Commodity Consulting. He’s got both irons covered as far as the speculative side as well as the commercial side of the market.
What activities do you enjoy?
Besides chasing around my kids, ages 3 and 5, I enjoy disappearing to the mountains with my backcountry skis.