March Soybeans Top $16 as USDA's Ag Outlook Forum Could Fuel More Explosive Price Action Next Week
U.S. Farm Report 02/19/22 - Roundtable 1
South America is still in the driver’s seat when it comes to commodity prices. March soybeans traded above $16 to end the week, and March corn closed above the $6.50 per bushel mark Friday. As commodity prices continue on the bullish run, concerns about the crop size in South America are helping propel soybean prices, and that’s also supporting other commodities like corn.
Just this week, China canceled 10 cargoes of soybeans from Brazil, claiming price was the issue, and it's that demand that could find a new home in the U.S.
Matt Bennett of AgMarket.net says while volatility is the headline of the commodity markets right now, much of that is being driven by issues in Brazil and the impact it's having on U.S. demand.
“For instance, USDA comes out on the February report with a 134 million metric ton estimate, CONAB comes out the next day with 125 [million metric ton] We've seen as low as 122. The difference between USDA and CONAB with 9 million metric tons is essentially the U.S. carry out whenever you're looking at over 300 million bushels with 9 million metric tons. So, there's no question that final number is going to be quite important," Bennett said during the live taping of U.S. Farm Report at the National Farm Machinery Show this week.
Bennett points out USDA ‘s estimate of Brazil’s crop is the highest among all forecasts right now, a key figure that traders and analysts will be watching closely next week during USDA's annual Ag Outlook Forum. The February meeting, which takes place Feb. 23-24, 2022 this year, is typically one that doesn’t draw much attention; however, with the discrepancy in key figures, the Ag Outlook Forum this year could draw more attention and reaction.
“Typically, this is a report that we look at for about 10 minutes, and then we move on to their lives,” says Andrew Jackson of Producers’ Hedge, LLC. “We're already on pins and needles. This isn't 2018 or 2017 with the market acting kind of sludgy and at a standstill. So, with the volatility, it doesn't take much to get traders excited for stops to start getting hit or for us to move hard in one direction or the other.”
The momentum in the commodity markets is creating a lot of buzz and excitement. Last week on the show, one analyst even brought up the possibility of $18 soybeans. Whether producers see $18 cash soybeans or not, that buzz is creating a lot of noise for farmers trying to navigate their game plan this year.
“Block out the noise, sit down and run your cash flows, understand that we are going to see swings this year in the prices, without a doubt,” says Alan Hoskins of American Farm Mortgage. “These cash flows are going to be dynamic to the point that run them with the higher estimated prices, run them with a lower, understand what your risk levels are, and factor your crop insurance into that.”
