Business is brisk when there’s a fire sale, and there’s no better example than June, July and August demand for U.S. soybeans.
According to the USDA’s Sept. 1 “Grain Stocks” report, the industry used 781 million bushels in the fourth quarter, more than 100 million bushels more than the previous record, which was set in the 2015–16 crop year.
When China’s tariffs went into place earlier this year, many analysts called for lower demand, which, in turn, forced a sharp sell-off in futures prices.
Those rock-bottom bean prices have attracted cost-conscious buyers from around the globe. Exports were only down 2 percent for the 2017–18 season. At the same time, soybean crush notched new records, and exports of soybean meal have jumped 20%.
Forlorn futures prices are still causing trouble for farmers’ finances nationwide, but the rise of alternative buyers and shifting trade flows softened the blow in certain regions. Yes, basis levels are wider than average for this time of year across the board, but growers in the Northern Plains are facing particularly hard times.
At harvest, elevators in North Dakota were offering farmers $2 less than futures prices for soybeans, if they bid for beans at all. While in Illinois, basis levels ranged from 75 cents to $1 below futures prices.
“If you look at Illinois, certainly basis is weaker, but that’s more of an indication of the supply situation than the demand situation,” CoBank Knowledge Exchange economist Will Secor says. He’s heard reports of 80-bushel-per-acre (bpa) yields in northern Illinois, and USDA is forecasting a record yield of 66 bpa.
Illinois growers also have the advantage of multiple marketing avenues with a large number of soybean processors in the state and access to the Gulf of Mexico export market.
Growers in the Northern Plains are also expecting a large crop but have fewer processors, and typically ship soybeans to ports in the Pacific Northwest (PNW) at harvest to feed China’s voracious appetite. But, this year, PNW export terminals aren’t offering bids.
“Without that Chinese demand, elevators don’t really know where they’re going to be shipping those soybeans or how long they’re going to have to hold them,” he says. “They just don’t know exactly what this demand environment is yet.”
Many are exploring alternatives--such as shipping soybeans by rail into the St. Louis barge market--but the potential of hefty freight bills amid the logistics morass also puts basis under pressure.
As a result, farmers and elevators put beans in the bin, hoping U.S. and Chinese politicians find a solution to the trade dispute that gives better marketing opportunities down the road. .
Secor says he used to be optimistic the dispute would resolve before harvest. Instead, the U.S. upped the ante by applying more tariffs to Chinese goods. Now, it’s becoming “harder and harder to dig back out,” he says. The question is: How long will farmers have to wait?
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