A successful farmer once told me to listen to politicians with skepticism but watch what they do with interest. The election was a prime example of impacting our economic well-being and future agricultural policies.
The fundamental headwinds in price outlook remain. The ending stocks for corn, soybeans and wheat have been increasing since the Ukrainian invasion peaked grain prices. Prices have since retreated 100% of the gains back to ground zero ahead of a new administration.
The problem with increasing ending stocks (surpluses) is they are carried into a new marketing year. Corn carryover on Aug. 30 carried 1.76 billion bushels into our new marketing year — 400 million more than the previous year. Coupled with a record corn crop, ending stocks will grow another 200 million bushels by Aug. 30, 2025. That carry-in to the crop two years out suggests stocks building and further pressure on prices without a major production shortfall. USDA said in early November carryout for 2025/26 would rise 330 million bushels.
Good and Bad News Behind Us
The most obvious impact of ever-increasing excess stocks can be seen by the five-year U.S. supply and demand table. The ending stocks in 2021/22 corresponds to prices of soybeans in the $16 to $17 range, helped also by questions of the South American production keeping those lofty levels in place until more was known about the U.S. crop. Prices retreated as crops stabilized and ending stocks rose to the current outlook of 470 million bushels.
The USDA came out with their early 25/26 projections with soybean acres at 85 million with production at 4.42 mil-bu and ending stocks at 515 mil-bu.–a level not seen since 2019/20. Prices hadn’t reached $10 prior, and it took a war event, weather in the Southern Hemisphere and fear of supply shortage to accelerate beans to $17. Quite the opposite is in place today with a change in the eco-political landscape. We were also looking forward to the prospects of an accelerated demand for soybean oil. Remember the impossible task to meet demand in three to four years?
The “three-to-four year” outlook has arrived but with additional headwinds for bio-feed stocks having to deal with local used cooking oil (UCO) as an alternative and the increasing imports of UCO including China. Prices of canola and soybean oil have new life after retreating to pre-veggie diesel hype. In fact, soybeans reached lows in August near $9.50.
Outlook
The question becomes whether threats of import tariffs include barring UCO imports outright or merely tariffing the product, especially from China. How much tariff is sufficient for it to become unprofitable to use?
The long-term answer is for our U.S. domestic demand to increase. Biofuels usage, if allowed to increase, helps soybean prices. The same goes for corn excess. The results on the price of feedstocks due to increased biofuels in Brazil and Indonesia is a testament of such a policy, and it severs the dependence on the Big Gorilla in the room: China.
