Will market factors keep feeding the bull?

By Doug Tenney, Leist Mercantile

We are fortunate to have a field of soybeans or corn each year at the edge of our backyard. On a recent hectic Thursday, with a list of “home” work yet to go, Cindy chose to take a short break on the back porch swing. Then she heard a combine. She said, “I ditched my list to soak up every minute of watching the harvest. I’ve spent money for tickets to see things nowhere nearly as satisfying and fascinating.” A one-time-a-year production as a result of the hard work, planning, and amazing dedication of the lovers of the land. What a gift!

Weeks long soybean planting delays in Brazil continued to make headlines in mid-October. Dry conditions for Brazil continue to be problematic as timely rains are not taking place during the September and October planting season. Those dry conditions will prevent Brazil from reaching the typical January shipping pace of 6.5 to 8 million tons of soybeans into China. It means additional soybean exports from the U.S. will be destined for China. Numerous U.S. soybean export sales for China took place during September and early October for December 2020 to January 2021 arrival at China’s ports. During that same time there were U.S. sales for February arrival in China. It is most unusual for the U.S. to capture that February time slot. The October Supply and Demand Report reflects those additional sales as U.S. soybean exports are now projected at 2.2 billion bushels, an increase of 75 million bushels from the September report.  

Ohio corn and soybean harvesting progress continues to march forward as weather permits. The first two weeks of October had few harvest delays for Ohio as a result of limited rain events. However, foggy conditions and heavy morning dews served to significantly reduce daily soybean harvested acre totals on numerous occasions. Corn harvest progress was slow due to moisture levels higher than normal compared to levels seen in past years during the first half of October. Unfortunately, this has been the norm for a huge number of Ohio’s producers this fall. The higher moisture levels for corn translate to additional costs which contribute to push margins even lower in an already thin-margin environment.

U.S. soybean exports to China will be higher than those of previous years. As of early October, U.S. soybean sales to China were 19 million tons. An additional 10 million tons of soybean sales were to unknown destinations which most likely will go to China. It puts U.S. soybean sales to China at 29 million tons with some analysts suggesting that final sales number could peak at 32 million tons. 

The U.S. corn export scenario looks to be improving compared to projections from several months ago. In recent weeks there have been multiple sales of U.S. corn to China for April. Those sales continue in spite of USDA projecting just 7 million tons of corn imports into China from all of the world’s corn exporters. Contrast that number to projections from other analysts suggesting the China corn import number from the U.S. alone, could instead reach 24 million tons by the end of next August.

It’s a challenge to fathom how quickly the price and demand dynamics have changed for both corn and soybeans since mid-August. In just a few weeks, ideas of corn harvest prices falling below $3, have instead pushed December CBOT prices to $4.00 to $4.05. In addition, weeks ago harvest prices for soybeans seemed destined for $8 and below. Mid-October, November CBOT soybean prices reached $10.79. Ohio producers had days, not minutes, to capture harvest delivery for soybeans of $10.20 to $10.40 and higher. 

In just one additional demand feature among those not seen during the summer was the possibility of Brazil temporarily eliminating its corn and soybean import tax of 8%. Brazil may have to import corn and soybeans in order to have adequate supplies for its exports sales already on the books. Imports into Brazil would almost certainly be sourced from the U.S. However, the U.S. Gulf elevation capacity is quickly getting booked and maxed out for weeks into the future. 

Harvest results at mid-October suggest plenty of soybeans are moving to town. It comes in part due to producers realizing flat price levels for January to March 2021 delivery compared to October and November 2020 delivery are only netting pennies and nickels more money compared to multiple dimes better in previous years.

Quote for the day. “What you see depends on how you view the world. To most people, it is just dirt. To a farmer, it is potential.” – Doe Zantamata.

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