Price Surge Boosts Potential Profits for U.S. Soybean Farmers

June 1, 2016 04:00 PM
 
Soybeans

American soybean farmers would do well to take advantage of the surge in futures caused by South American weather woes, according to Mark Ash, an agricultural economist at USDA.

“Don’t wait too long on making future sales,” he advised producers during a Tuesday webinar by Allendale, a marketing and research firm in McHenry, Ill.

On Wednesday, for example, July soybeans were trading at $10.96-4, up 18 cents at midday. A Reuters survey cited by Allendale said that U.S. farmers have sold almost double the usual amount of new-crop soybeans to lock in profits with the market rally. Soymeal futures on the Chicago Board of Trade have also surged 51% since early April due to concerns about Argentine flooding.

That ongoing weather situation has resulted in more demand for U.S. soybeans, according to Ash. But he also cautioned that “most of the rally is on a perspective basis. “ Crop stocks still are fairly high, and the harvest is delayed, but catching up, Ash observed.

In terms of the Argentine harvest, the Buenos Aires Grain Exchange recently cut its estimated soybean harvest from 60 million metric tons to 56 million metric tons, with 72% of the harvest completed.

But some analysts think the country’s soybean losses may be higher than that. Analyst Pablo Adreani, of the Buenos Aires-based AgriPAC consultancy, estimated 8 million metric tons of soybean production losses, according to a Reuters report.

Brazil is experiencing similar problems. It is expected to load 20% fewer soybeans at its ports in June, according to Allendale.

That’s good news for U.S. growers.

The South American shortfall has caught many soybean importers off-guard, forcing them to find new supplies. “The U.S. is best situated to fill that role and that is why we have strength in the U.S. (markets),” Ash said, adding: “It will provide more demand for U.S. soybean exports just to fulfill demand from China.”

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