I have often said that soybeans are the great liars. It was brought home to me again today, when a friend from Ohio posted a picture on twitter of his beautiful looking soybeans. I responded by giving him the liar line and he responded by asking me if I was implying soybeans aren’t sold for their stems! In other words, he was talking about vegetative growth versus reproductive growth. He’d rather see more beans than taller plants. Hence, that’s how soybeans get the reputation. It is always hard to tell how they will yield based on how they look.
On my own farm I’ve got three fields of soybeans, which I’ve never been quite satisfied all year. They were my last planted fields and didn’t come up very well. It was a judgment call on replant and I decided not to because it was very late in the season. I was hoping for good summer weather and rains in August to make those soybeans branch out. It’s been dry on those fields until today when they received 3 inches of rain. So I hope that decision to leave those fields turns out to be prophetic.
Interestingly enough and regretfully soybeans have been taking a pounding in the market lately. We have lost about a dollar in futures value over the last three weeks. With the Canadian dollar going up our soybean basis has suffered as well in Ontario. It has been a double whammy on price, never a good feeling for Ontario soybean farmers. Of course, we will hope for a rebound.
Having said that I was quite interested in DTN’s Todd Hultman’s analysis of the soybean market in his daily closing market commentary last Thursday. Todd talked about how the soybean market is a good example of an “incoherent” market. I had never really heard of the market being described that way. Needless to say, what Todd was implying was despite the dollar decrease in futures value over the last three weeks, US exports are expected to remain at record levels. USDA is also expected to cut ending stocks in future reports. Even with the downtrend in seasonal soybean price behavior, an argument can be made that soybeans are holding their own.
The futures price drop in soybeans has been largely due to the weather in the Midwest. It was only a week or two ago that hot and dry weather forecast were dominating the hype surrounding price action. That all changed a couple of weekends ago when the weather forecast turned to cooler and wetter weather across the Midwest. We all know that soybeans love rain in August and that has been a prescription for the futures price drop.
Of course, we all know that the soybeans aren’t made yet. Next week I will be traveling to Iowa on a tour to the Kinze plant near Williamsburg. I am looking forward to that. I have not been to Iowa since I was a child and having a tour through Illinois and Iowa will give me a good impression of crops. Needless to say, rains in August make the US crop. The USDA has been musing about the soybean crop of 48 bushels per acre. Lately, the soybean crop has improved its condition according to the USDA. However, if it doesn’t quite go as planned the soybean ending stocks will be much lower, which should be reflected in an increased futures price. On the other hand if cool and rainy weather continues in the Midwest, US soybean yield might rival or surpass last year. It is a critical time.
US soybean prices remain competitive with Brazil. Chinese consumption of soybeans continues to increase, a very good thing for those of us who grow beans. It harkens back to a trip I took to Asia in 1993. I met with a soybean buyer in Singapore, who told me that every day in East Asia families sit down for a little bit of soybean every morning. As a North American, I could hardly imagine. However, there are a lot more people in East Asia than there was in 1993 and they have continued to eat soybeans. That demand continues its amazing dynamism.
So we move ahead with those soybeans out in the field. In Ontario, the crop is late, mine included. However, it is not made here or anywhere else in North America, but it’s getting close. So when you look at those soybean fields this month don’t be fooled. The soybean yield paradigm is always a puzzle. Soybeans might be the great liars, but at the end of the day they always tell the truth. In another month’s time that truth will surely be closer.