By Doug Tenney, Leist Mercantile
The strong China buying bonanza for U.S. soybeans and U.S. corn the last several months has been instrumental in the price gains seen for January soybeans from July to the end of October. Summer lows were $8.40 for January CBOT soybeans. December CBOT corn had a low this summer of $3.20. During much of the early growing season there was much press about China not meeting the goals of purchasing $36 billion of U.S. agricultural goods. By the end of October it was estimated they had purchased at least 30 million tons (1.1 billion bushels) of U.S. soybeans.
In addition, analysts are suggesting China could be purchasing 20 million tons of U.S. corn. China recently issued additional corn import licenses, above the first round of import licenses of seven million tons. They were a buyer of U.S. corn numerous times in October. Many are anticipating U.S. corn and U.S. soybean export numbers to increase in coming months, further reducing ending stocks.
Brazil continues to lack the soybean planting pace and completion their producers had expected. With exportable supplies of soybeans in Brazil at virtually zero, the U.S. will be the go to supplier of soybeans for importing countries into early February. During September, the U.S. was selling soybeans to China for December and January delivery. Then last month, the market was surprised to see numerous soybean sales for February delivery. In addition, the U.S. completed corn sales to China for April 2021 delivery. Last month, both corn and soybeans pushed higher with the additional sales of both commodities into China. Late October, December CBOT corn reached $4.22, while January CBOT soybeans reached $10.88. Both numbers seemed impossible to reach in mid-August.
Corn basis values the last half of October have seen gains in spite of harvesting activity still taking place. Our office charted gains ranging from 5 to 20 cents at a comparison of over 20 Ohio facilities. Ohio is not unique for seeing the corn basis improving during harvest. The October 26 USDA weekly crop progress report had U.S. corn harvest at 72% while the Ohio corn harvest was just 32%, 20 points behind the 5-year average. The stark reality is the U.S. corn pipeline is not getting fully recharged in spite of corn harvest activity taking place. Producers across Ohio and the U.S. have been strong holders of corn as harvest is taking place, hoping for higher price levels down the road rather than taking it to town this fall and selling it.
Strong focus has been placed on selling soybeans to put money into their checkbook. Another factor for some in the equation to hold unsold corn into January, has been the hope of seeing an additional payment similar to the CFAP (Coronavirus Food Assistance Program) which took place in the January to March time frame this year.
In spite of many soybeans moving into the pipeline this fall and getting sold, flat price levels for January delivery compared to this fall are barely just pennies higher. As producers look even further ahead to March delivery and beyond for soybeans, those values are often a dime or more less than November or January delivery. Previous years’ comparisons for November versus January delivery for soybeans have often been 20 to 30 cents higher for January.
Dry weather conditions during September and October continue to keep the Brazil soybean planting behind normal. That planting pace has been instrumental for the U.S. to capture soybean sales into China for December, January, and February. The strong sales of both corn and soybeans have maxed out U.S. export capacity into the end of 2020.