Soybean traders expect large 2017 U.S. soybean production

Beneficial rains in August have helped soybean crop conditions somewhat and that, along with a large South American crop, have helped pressure the soybean market lower.

As of Aug. 22, local cash soybean prices were at $8.50 per bushel, down about 50 cents from two weeks prior for harvest delivery. Still, that’s better than a year ago.

“We’re still above the lows made in the fall of 2016, but those certainly could be tested sometime during the harvest period depending on what actual yields are,” said Al Kluis, president and managing partner of Kluis Commodities in Wayzata, Minn.

“(The 2017 U.S. crop) is going to be a very good crop, but probably not as large as the 2016 crop, but you also have about 4 million more acres of soybeans this year, so there’s the potential for a record soybean harvest in the U.S. this year because of the large increase in acreage.”

Conventional wisdom states that the soybean crop is “made” in August as it is a very critical month for the soybean reproductive cycle and determining potential soybean yields. Rain is important not only for flowering, but also for pod set and seed development. Fortunately, there were some very nice rains in recent weeks, which were a huge benefit to this year’s crop and to producers in Minnesota and North and South Dakota, according to Kluis.

“Unless we have an early frost, the crop that we have in the U.S. is what it is,” he said.

In the coming weeks, the market will monitor crop conditions here in the U.S., but more and more of the market’s attention will focus on weather and crop development in South America, Kluis noted.

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In late August and early September producers in a few areas of South America will begin to plant soybeans. However, most of the attention will be focused on planting as it gets into full gear starting in November through February of next year.

The current price situation may have an impact on South American producers’ decisions on how many acres of soybeans to plant.

“These low soybean prices are going to level what they do in South America in terms of acreage. They may look at perhaps leaving it unchanged or increasing it slightly by 2-3 percent from last year,” he said.

Producers there are considering a slight adjustment out of corn and into more soybeans.

On the demand side, Kluis reported that soybean exports have been good for the 2016-17 year, but they’re starting to fall behind for new crop. At this stage of the year, shortly before harvest begins, the U.S. soybean export pace tends to be slow. Most of the international buyers are going to Brazil and Argentina to source their soybeans.

The U.S. export pace is expected to pick up as 2017 harvest begins here. As of right now, exports haven’t been bad, but there haven’t been any huge sales, just small volumes.

Producers will have tough decisions to make.

“Earlier, producers had multiple opportunities to hedge their crop above $10. Hopefully they did that,” Kluis said.

“If we get a rebound rally toward $9.60 I sure think you should be using that to get some stuff sold,” he said, adding that he advised producers to watch what happens here in terms of this year’s crop, and to consider storage.

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“I think the people that store soybeans into December 2017 and March 2018 will be paid pretty well. You’ve got not only a lousy futures price but also a very wide basis at this time so that really makes a tough situation for people and their profitability,” he concluded.

 

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