This week finds me loading soybeans. That’s non-gmo soybeans, commonly called SQWH. In Ontario that means special quality white hilium. However, from my perspective they are the same old soybeans I produced 30 years ago as a teenager.
Back in those days, you planted the soybeans in a cloud of dust; rotary hoed them, cultivated them twice and hoed them all summer. They were non-gmo but we didn’t know it. Many of them were white hilium but nobody really knew what SQWH was. Of course nobody could ever imagine the day where soybean growers through away their privacy and signed technology use agreements to plant soybeans which you could spray with Roundup.
30 years later I’m finding I still do it. No, I don’t plant them in the dust anymore and my rotary hoe is rusting away beside the old cultivator. I still have a hoe, but I use it mostly for poking things unless I see the odd giant ragweed in the field. It leaves me as a non-gmo soybean grower, a distinction I neither asked for nor wanted.
At the present time, that’s a bit spooky because I get a premium for soybeans at prices, which only a few years ago were hard to imagine. That puts me at price levels, which are double what I consider an average Ontario cash price. Yes its good for me. Yes, it’s good for everybody who grows soybeans. How this will pan out as we look out into 2008 is another thing. Pricing those soybeans in 2008 will surely be a challenge.
Why you say? I’ve always maintained that pricing crops is much more challenging when prices are high versus when they are low. My reasoning has always been that at very low price levels, you don’t have much to lose. However, with March 2008 soybeans futures closing today at $14.05 and November at $13.78 there is a lot of air underneath us. Picking where to price this crop in these unprecedented marketing times is like shooting on a moving basket.
Take the latest 2008 estimates from the USDA, which were released this morning. Projected US soybean planted acreage is projected to come in at 71 million acres. Whoa, Nellie! Remember last year the US planted acreage of soybeans was 63.7 million acres. In Ontario last year we had 2.24 million acres of soybeans. I’m not quite sure we can expect more soybeans in Ontario partly because of the 1.3 million acres of wheat in the ground and partly because of corn’s agronomic superiority. Planting decisions are being made now, but if the spring turns ugly more soybeans in Ontario might come to fruition.
US Ending stocks for soybeans in February came in at 160 million bushels. 160 millions bushels!!! What’s that mean? That’s a bit like saying the unemployment rate in Alberta is 3%. The point being 160 million bushels is as close to zero as anybody wants to guess, especially the USDA. I’ll take that back if they reduce it below 100 million in March or April. However, whichever way you look at it the world is crying out for vegetable oils and the lowly soybean seems to be enjoying its day in the sun.
It might be like a Monday morning quarterback but in many ways you could see this coming. When the USDA came out last March 30th and cut soybean acres back to 64 million amid all the corn ethanol hype, it projected a huge bite out of the global soybean market. Going forward most farmers were watching corn, because people like me were telling them to. However, you cannot discount corn’s agronomic superiority to soybeans. As one Indiana farmer recently mused on the pages of DTN, soybeans are getting like sheep and chickens. All they are is trouble.
He’s was referring to aphids, the spectre of Asian soybean rust which invariably leads to the very real yield drag in soybeans versus corn. As one soybean breeder recently told me, corn breeders have to worry about a couple of bugs. The soybean breeder has to worry about a myriad of bugs, some of which like the soybean aphid reproduces in spades.
It all should lead to interesting times ahead. I know on my farm I can consistently produce higher yielding corn than I can soybeans any day. However, with the soybean price surging and corn inputs doing the same maybe its time to think again. The simple truth is our 2008 commodity markets have to figure all of this out. As we move forward we’re moving into an environment where prices will have explosive and violent volatility. And to think we got to this point without a “weather scare.” If that shows up on some hot dry ordinary Tuesday in June or July or some rain drenched unplanted seedbed in April, price discovery will surely take on new meaning.