As Combines Roll, In 2013/14 It’s All About Soybeans

Soybeans 510
I will be starting soybean harvest tomorrow.  It is been a long year since those heady days in May when I planted my soybeans into the warm soils of southwestern Ontario.  When I plant soybeans I always hope that I have good weather for emergence because if I don’t, that generally stays with you the whole year.  It just so happens that in 2013, that is exactly what happened.  I got about 15 inches of rain between the end of May and July 4th.   Soybean simply can’t take that.

So I have uneven fields.  In many cases I have what is called “tile run” soybeans.  Right over the tile drain the soybeans are fairly normal but between the drains the soybeans are stunted.  They never did come back and I’m expecting him below normal yield on what could be a very good soybean year.

I say that because soybeans prices have been the late summer star of the commodity complex.  We all know that as the late flash drought in the United States punished the soybean plant just when it needed rain the most.  Soybeans in the teens should always get you excited especially at a time when the price of corn seems to be caught in the harvest doldrums.  Look toward the October USDA report to put a little bit more excitement in the market.  At this time I’d bet on more corn and less soybeans.  Of course in that report acreage will be a major factor.

Needless to say, I think for the near future and into 2014 it’s all about soybeans.  It would seem that the world is full of feed grains.  That’s what $8 dollar corn will do for you.  I remember last year I couldn’t do anything wrong.  I would put a standing order out for $6 $7 and $7.50 corn and they just kept hitting.   Of course it is not quite that like that this year, as the world has responded with corn everywhere.  There are even some American analysts who think that the October report will show closer to 100 million 2013 corn acres in the United States.

That would seem a stretch to me.  However, whatever the number is corn-ending stocks are likely to be around 1.5 billion bushels for the new crop year.  Even if there is a last-minute hiccup in yield that won’t change much.  So as I look ahead it would seem to me growing corn is not going to be as much fun as it used to be.  That’s why I think it’s all about soybeans.  The only problem I have is getting soybeans to yield relatively as much as my corn.

Last week I had the distinct pleasure of having DTN Senior analyst Darin Newsom visit my farm near Dresden Ontario.  Yes, I even had Darin out in my soybean field.  Too bad I didn’t have any really good-looking crops to show him.  We chatted much when he was here and one thing I said in passing was that I was not going to grow as much corn next year.  With Ontario having the cheapest corn in North America and everybody growing feed grains around the world, Phil Shaw was going to outsmart everybody and grow soybeans!  LOL!  Of course I’m only half kidding.

When I think about soybeans, I think about increasing Chinese demand.  In 2012/13 China imported 59 million metric tons of soybeans and they are expected to increase that for this coming year to 69 million metric tonnes.  It is about human consumption but it also is about increased livestock herds in China.  Soybean meal is needed.  That $8 corn actually had Chinese growing more corn versus the soybeans.  China has to get the soybeans from somewhere unlike corn, which in 2013/14 can be garnered from just about anywhere.

According to the China Feed Industry Association Chinese demand for vegetable oils is 20.4 kg per person.  The world averages 16.45 kg per person and in the United States the demand is 31 kg per person.  That statistic just serves as a symbol of potential pent-up demand for vegetable oils in China.  Soybeans will certainly be a large part of that.

So if I am growing more soybeans, will North America follow?  I doubt it and for one big reason.  Corn productivity on a per acre basis is consistently better almost exponentially on an annual basis versus soybean productivity per acre.  So that means farmers can expect increasing yields from corn on a consistent basis versus growing soybeans.  So in the long term that means soybean prices must go up but not necessarily corn prices.  Where you find yourself in that paradigm is the secret to profitability.

This year I’ll probably have 35 bushels per acre soybeans stamped on my forehead.  So that’s not so good, but I’ll probably have over 200-bushels/acre corn.  That says a lot.  On a more macro level, it says that soybean prices have some work to do.  In 2013/14 I think soybean prices will figure that out.