Editor's note: On Aug. 10, 2012, The USDA announced soybean production at 2.69 billion bushels, down 12 percent from last year. Yields are expected to average 36.1 bushels per acre.
The CME Group traded November soybeans at $16.52 per bushel - up 23.5 cents from when this report was written on Aug. 3. Cash soybeans at a local elevator in western Minnesota traded at $16.58 per bushel -- up 22 cents from when this report was written on Aug. 3.
Producers and traders have not totally given up on the U.S. soybean crop yet.
If rainfall returns to the Corn Belt via hurricanes, El Nino rain events or just plain old thundershowers, it’s possible that some of the soybeans could still produce a good crop.
For Aug. 11-17, the Climate Prediction Center forecast below-normal rainfall for most of the Corn Belt. Normal rainfall was forecast for most of Minnesota and North Dakota.
On the CME Group exchange, soybeans on Aug. 3 traded with September at $16.37, November at $16.285, January at $16.24, March at $15.43, May at $14.58, July at $14.46 and August 2013 at $14.195.
“Anytime you see an inverted market, what they are telling us is they want product now,” said Randy Martinson, of Progressive Ag, West Fargo, N.D. “The end users are coming to the futures market and buying or trying to secure product so they can have their needs met.”
Compared with prices on July 19, September was 51 cents lower, November was 20 cents lower, January was 10 cents lower, March was 20 cents higher, May was 12 cents higher, July was 6 cents higher, and August 2013 was 8.5 cents lower.
According to the CME Group website on Aug. 3, “The next two weeks remain very critical for soybean development and warmer and dry conditions continue to stress soybeans across the United States. Traders continue to monitor Tropical Depression 5 in the Atlantic, but the forecasted track pulls the storm west towards Mexico.”
On Aug. 2, the USDA reported weekly soybean export sales of 246,400 metric tons or 9 million bushels. While soybean export sales are ahead of USDA’s expectation for the 2011/12 marketing year, the sales total was still considered low.
“We have a pretty good soybean market all the way out to our January 2013 market, but further out from there, we fall off pretty hard on the anticipation of a South American crop,” said Martinson.
A lot of farmers have sold a portion of their crops, although there is concern about supply totals and how that will affect prices.
“Soybeans are undervalued when compared to corn right now,” he said. “We always talk about the ratio between soybeans and corn – it needs to be 2.3 or 2.4 to 1. Right now it’s about 2 to 1. That tells us soybeans are a little undervalued from where they should be.
“If we see beans go to a 2.3 or 2.4, we would be looking at close to $20 beans.”
Ahead of the Aug. 10 USDA Crop Production report, Informa forecast soybean yields of 37.2 bushels per acre and a total U.S. crop of 2.791 billion bushels.
In July, the USDA had estimated the U.S. soybean crop at 40.5 bushels per acre, or a total crop of 3.05 billion bushels.
“Farm Futures” magazine estimated an average yield of 35.8 bushels per acre or just less than 2.7 billion bushels. INTL FCStone came out with an estimate of 36.2 bushels per acre, or about 2.73 billion bushels.
“If we see any kind of issue with heat coming in and affecting production in soybeans, if conditions continue to decline, we have the potential to see easily $20 in that soybean market,” he said.
At one elevator in west central Minnesota followed in this column, cash soybeans on Aug. 3 were $16.36 with a basis of plus 9 cents. Compared with the bid on July 19, soybeans were 52 cents lower, but the basis had improved by 54 cents. This unusual basis suggests the elevator was calling for soybeans to fill an order or to ship on a unit train.
“It is interesting to see when soybean basis tightens up – you know there isn’t many beans out there and they need to get them,” said Martinson.