I’m Dreaming of $20 Soybeans Again

Corn and soybean futures surged today to their contract highs and of course I’m still dreaming of $20 soybeans. I’m just kidding. If you have read this column over the last 34 years, you’ll know, that’s been a recurring theme of mine. I don’t know if I’ll ever get there, but keep in mind nobody else knows either. These contract highs for both corn and soybeans during the peak of harvest have puzzled many market observers.

Good prices are back and sure, we’re all happy about it. However, it is not the news of the week, that has to do with the elephant in the room I referred to last week. On November 3rd our American friends went to the polls to elect a plethora of public officials including the President of the United States. You know the rest of the story, Biden won, but President Trump said he won.

Up until this time, I’ve asked many people who they thought might win, and of course you get all kinds of opinions. However, I had one colleague in Iowa give me an interesting response. He’s a Canadian farm boy from southwestern Ontario, who moved there many years ago to work for an agricultural company. What he told me was he was expecting a lot of litigation post November 3rd.

From a Canadian perspective, that was hard to believe. However, as of Thursday it all started and there is litigation seemingly everywhere. Our American friends are divided. President Trump and former Vice President Biden are in for a battle and it seems litigation will be punting this thing into the future.

In lieu of that, we’ll need to continue what we do. On this side of the border, we were looking for clarity. Looking ahead, there are a plethora of market factors, which will shape our future prices. Going into 2021, it should be a totally new day. If only we could slay that Covid 19 dragon.

A few weeks ago, I wrote a column talking about higher grain prices at a time when they should be low. Cash soybeans are $14 plus, cash corn off the combine is $5.39. It’s all based on higher futures prices and a Canadian dollar fluttering around 76 cents US. However, it’s also about a corn supply constrained world-wide, with American corn exports exploding. For the week ending October 29th, US exports were 102.8 million bushels, a huge amount. As it is, the US has a monopoly on the cheapest corn supplies in the world, at least until next spring.

In some ways, this is all about as surprising as the election result last Tuesday. In the election, it seemed much closer than the polls were expecting. Of course, it’s a strange election, because of Covid, so many votes through the mail, which have been slow to be counted. All of that surprised me, and at the same time, I find the effervescence in corn and soybean prices, the same way. I’ve always said nobody knows what grain markets will do. However, this has gone farther than many had expected.

Soybeans of course have led the charge up in prices. Today, soybeans, soybean meal and soybean oil hit contract highs. You know the drill, all that Chinese soybean buying of $9 American soybeans, etc., etc. and here we are. Remember, just 18 months ago, a billion-bushel soybean carryout? Now, with Brazil out of soybeans and the November USDA report increasing US soybeans exports and decrease putting soybean ending stocks to 190 million bushels. That is quite a boomerang from the days of 1 billion bushels of American ending soybean stocks.

What we do know is markets are volatile. I like looking at the inverse of forward futures curves. For soybeans, the January to March futures spread continues to weaken, the weakest since September 29th. This tells you that non-commercial demand is a little less interested in buying. However, at this point, it just adds to the soybean narrative. We got here with our eyes wide open.

As we move ahead, this market should just grow more dynamic. Sure, our Brazilian friends are in overdrive planting soybeans. South American weather will surely influence price going forward. Then there are those geopolitical concerns. That’s right, it’s that elephant in the room I talked about earlier. Let’s hope the dust clears. A little bit of clarity is good for grain markets too.