Soybean prices have risen the past two weeks. November soybeans on the Chicago Board of Trade jumped more than 33 cents per bushel this week, closing Wednesday just shy of $10 per bushel. It’s the most lucrative November 2016 futures price since January 2015 and nearly $1.30 higher than March 1. Will the recent rise in soybean prices entice some farmers to plant fewer acres to corn and more to soybeans?
Iowa State University Extension economist Chad Hart thinks it will. He wouldn’t be surprised if 100,000 more soybean acres are planted in Iowa than USDA projected in its 2016 Planting Intentions Report released at the end of March. Other states could also see an increase in soybean planting this spring, by another 100,000 acres or more, says Hart. “Corn had an economic advantage over soybeans when farmers made their acreage plans during the winter. But that situation has changed to favor soybeans, as several factors have come together recently and pushed soybean prices higher.”
Some Iowa fields will likely be switched from corn to soybeans
Hart doesn’t see an overall big shift to soybeans occurring this spring, but some switching from corn to soybeans will occur, he predicts. Farmers with a few fields where they’ve been debating whether to plant corn or soybeans, will likely plant them to beans, as a result of the recent soybean market rally.
“The recent strength in soybean prices is good news,” says Ray Gaesser, who farms in the Corning-Lenox area in southwest Iowa. “We need the price to get back to where farmers can at least break even on beans they will be growing this year.” He adds, “In our farming operation we’ve been selling lightly into this rising market. We have a few soybeans from our new crop sold and have some protection with calls in case the weather turns bad this summer. But for us, if we can approach getting a price of $10 per bushel for beans, that’s a good place to start, for this year anyway.”
Market is nudging up against $10 for November soybeans
Stephanie Essick of Dickens in northwest Iowa is also encouraged by the improvement in 2016 crop soybean prices. She says near-perfect soil and weather conditions allowed her to finish strip tilling and get a good start on corn planting. From Thursday, April 14 through Sunday, April 17, Essick planted about 75% of her corn before rain came and halted planting. Her new 1775 16-row John Deere planter allows her to cover ground quicker. She can plant at 8 mph or more instead of 5 mph.
Essick, who farms with her father, doesn’t plan to alter their usual 50-50 corn-soybean rotation this year due to prices. But she’s making some sales. “We already have our fertilizer applied for corn. There has been a lot of fertilizer applied by farmers to plant corn in their fields this spring,” she notes.
April 25 weekly crop progress report will provide an update
Planting was on hold statewide this week due to widespread showers. USDA’s next weekly crop progress report, to be released Monday, April 25, will provide an update on corn and soybean planting. “I know of farmers who haven’t started planting corn yet, and some who have already finished planting corn,” Essick said Thursday, April 21.
About 1.8 million acres of corn was planted in Iowa during the week ending Sunday, April 17, according to the weekly USDA Crop Progress Report released Monday, April 18. That’s 13% of the 13.9 million intended acres for corn planting in Iowa. There were scattered reports from farmers of some soybeans planted. Farmers in Iowa are projected to plant 9.7 million acres of soybeans this spring, according to USDA’s March 31 Planting Intentions Report, which was based on surveys of farmers in early March.
Good opportunity to take advantage of bean price rally
Corn planting progress varies from a low of 5% complete in east-central and northeast Iowa to a high of 27% in the south-central part of the state, as of April 17, the latest USDA weekly crop report says. Planting in Iowa is a week ahead of last year and the five-year average. Last week was the first measurable progress.
As farmers are waiting for fields to dry, Hart says now is a good opportunity to take advantage of the bean price rally. He suggests farmers use hedges, put options and other marketing tools to establish a floor on prices. Additional soybean acres could put downward pressure on the market. “It’s been more than a year since we’ve seen prices at these levels. Almost $10 per bushel is not a bad price for new crop beans.”
With tight margins, farmers need to manage financial risk
Other market analysts agree with Hart’s observation. Steve Nicholson, a grain and oilseed analyst with Rabo AgriFinance, says farmers need to know their cost of production and make sales accordingly. He says this recent uptick in soybean price is an opportunity to make a little money or at least limit what many farmers and economists thought would be significant losses a few months ago.
“This is an opportunity to manage your financial risk in 2016,” Nicholson notes. “From a farmer’s perspective, I wouldn’t be bashful about selling some beans. Be careful if you are waiting to see if the soybean market will go higher. I’m a bit surprised by its strength. If you are trading fundamentals, it will be difficult to support the rally.”
Analysts say better-than-expected U.S. soybean exports to China, Mexico, Russia and several other countries, along with heavy rains in Argentina which are curtailing that nation’s current soybean harvest, are reasons why the soybean market is rallying. A weaker U.S. dollar and a stronger Brazilian Real and fund traders shifting money to commodities, among other things, are also factors behind the soybean price rally.
There’s still a large supply of soybeans in U.S. and worldwide
However, there is still an ample supply of soybeans in the U.S. and worldwide, which will limit the upside potential for the soybean market. You need to keep that in mind when planning your marketing strategy, says Nicholson.
Grant Kimberley, market development director for the Iowa Soybean Association, says weather is what mostly drives late planting decisions in Iowa, but crop prices could cause acreage shifts from corn to beans for some farmers. Kimberley recently returned from China, the world’s No. 1 soybean buyer. Although China’s economy is slowing down, demand for protein in that large nation remains strong. “Soybean checkoff projects create long-term demand and they have been effective,” he points out.