Iowa Ag Connection - Soybean Records Fall as U.S. Harvest Begins

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Soybean Records Fall as U.S. Harvest Begins
Iowa Ag Connection - 09/14/2018

U.S. soybean farmers will harvest a record crop to feed ravenous domestic demand, according to government projections released this week.

After months of retreating prices and bad news due to the ongoing U.S-China trade war, Iowa Soybean Association (ISA) leaders welcomed today's mostly positive U.S. Department of Agriculture (USDA) numbers that led to an 8-cent increase in soybean prices.

"I think it's encouraging from a producer's standpoint the market went up a little based on a report that didn't have many changes," said Lindsay Greiner, a Keota farmer elected as ISA president last week. "Maybe the market has hit bottom. We're going to work hard talking with new customers and strengthening relationships with existing ones to find a home for all our beans to hopefully keep prices moving upward."

U.S. soybean production is forecast at nearly 4.7 billion bushels, up 2 percent from August and 7 percent from last year, according to the September USDA Crop Production Report. The national yield is pegged at 52.8 bushels per acre, up 1.2 bushels from last month and 3.7 bushels better than last year.

Iowa soybean production is forecasted at 590.4 million bushels, up nearly 10 million bushels from last month and more than 24 million bushels higher than the previous record set in 2016, according to the crop production report. The average yield is projected to tie the all-time-high at 60 bushels per acre. Favorable August rain and temperature led to a 1-bushel-per-acre increase from last month.

With combines ready to invade fields, ISA Market Development Director Grant Kimberley said the soybean industry faces a big challenge marketing the crop given China's 25-percent tariff on U.S. soybeans implemented on July 6. It has essentially halted sales to the country.

The ISA board of directors last week approved $50,000 in soybean checkoff funds to help the U.S. Soybean Export Council put on a soybean marketing event in Europe, bringing buyers and sellers together later this year. Similar efforts are planned in Southeast Asia and elsewhere.

"The industry will do what it takes to move as much soybeans, meal and oil as possible," Kimberley said. "ISA and its farmer leaders will continue to advocate for a swift end to the current trade challenges."

U.S soybean crush for the 2018-19 marketing year was increased by 10 million bushels to 2.07 billion, according to the September USDA World Agricultural Supply and Demand Estimates (WASDE) Report. Export projections held steady at 2.06 billion bushels.

National soybean ending stocks for 2018-19 increased by 60 million bushels to 845 million, according to the WASDE Report. The forecasted average farm price for soybeans ranges from $7.35 to $9.85 per bushel for the current marketing year, which began Sept. 1.

Cory Bratland, a trader with Kluis Commodity Advisors headquartered in Wayzata, Minnesota, told clients during a webinar today that high-level talks between U.S. and China trade negotiators are reportedly set to resume. That news along with strong demand, and the fact soybean production estimates didn't escalate like some traders speculated, likely led to a rebound in prices.

But it will take more to narrow "ugly" basis levels (the difference between local cash prices and futures contracts) for farmers, Bratland said.

"I hate to say it, but basis levels won't get better until something is done with China," he said. "If that happens, they will firm up. But it won't happen overnight."

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