A Dreary October Need Not Spoil the 2021 Soybean Story

There is nothing quite like a dreary October. It is at this time of year that you don’t want to find yourself with idle time. Unfortunately, I’ve had quite a bit of it lately as wet weather has staggered my soybean harvest which started on September 20th and continues when Mother Nature smiles. Unfortunately, that has meant that I’ve only combined 6 hours since October 4th as rain and gloomy weather has dominated much of October. Call it frustrating but call it normal. This is farming and that sometimes the way it goes.

I got another inch of rain this morning and you know things have gone awry when you start rationalizing that things could be worse. I often chuckle when I get interviewed by western Canadian commentators who ask me in spring if I have enough soil moisture? Hello, in southwestern Ontario we spend millions of dollars draining our land with tile to make it an even fight. It’s been such a wet year here in southwestern Ontario, we would be nowhere without it.

Aside from the mud on my combine tires the soybean market has been a good news story. Sure, soybean prices have fallen from where they were in June but did you really expect $17.00 soybeans forever? November soybeans were off about $0.21 today, but have been on a upward trend lately. This past May 12th the November to July future spread was an inverse of 65.25 cents, versus what it was on October 12th with a carry of 38.5 cents. In other words, demand is not as strong as it was earlier, which is significant. An overriding preponderance of soybeans in the United States along with the spectre of a huge Brazil soybean crop have made the soybean fundamentals a little bit different than we thought back in June of 2021.

Soybeans have been taking advantage of the general bullish nature of the vegetable market in general. I was struck the other day when I checked my Bangladesh media posts and found a notice that vegetable oil was going up in that South Asian country. This was at the retail level where the prices are regulated, and it gave me an indication of just how much pressure there is on the some vegetable oil markets. For instance, there is a huge inverse in the November January Malaysian palm oil futures spread at the present time which indicates big demand for palm oil now. With soybean, canola, sunflower and other vegetable oils truly substitutable for each other, it means those palm oil futures matter. So, amid the mud, I need to look forward to my next soybean harvest day with a bright sun. Being bullish soybeans is ok.

It also should be noted crude oil is also part of this mix and in a strange way even though it’s not a vegetable oil, it helps move everything which is an oil. Crude oil ended the day today at 82.5 U.S. dollars per barrel, which is almost gone straight up since August 23rd when oil closed at $64 a barrel. Thoughts of a post pandemic global economy are also driving up the price of crude.

All this market action has accentuated the demand for Ontario and Quebec soybeans. In a nutshell in Ontario, we export about 2/3 of our crop and domestically use the remaining third. There is an active market into Europe for Ontario soybeans, which has been aided somewhat from the slowdown in the US gulf ports from recent hurricanes. On top of this we also have the supply chain challenges of packaging these soybeans in containers vs. bulk vessels. It’s been a bit of a battle as we all know about the COVID related supply constraints.

Last year it was November when I finished soybean harvest. Halloween is always my goal; it seems the last few years that’s been hard to get. However, as you drive through Ontario countryside, you’ll still see a lot of soybeans out and that may affect basis levels going forward. At the same time, Mato Grosso in Brazil is 46% planted, way ahead of normal. Last year at this time they were at 8%. Another record Brazil soybean crop is expected. China has already booked some Brazil soybeans for 2022. It makes all my problems sinking in the mud as I drive my combine through the soybean fields so small. There seemingly are beans or the potential of beans everywhere.

It was mentioned to me last week by an Ontario soybean buyer how weird this fall has been. It’s like we’ve been here before, but this one is weirder. I think he was referring to the tile run wheat, which dominates my area as heavy rains have hurt emergence. Or he might simply be referring to the 2021 soybean crop year, where big prices have helped, but a tough wet slog harvest hasn’t made it easy. The challenge for all soybean farmers is to bring this crop in. There is corn to take off and it has a story too. Let’s hope mother nature lets up. It’s time to write the end of this harvest story.