After the September Report, are $10 Soybeans as Good as it Gets?

USFR-RT2 9.12.20
September soybean futures topped $10 on Friday, but with a large crop on the way, are these prices as good as it gets? U.S. Farm Report analysts discuss on U.S. Farm Report. ( Lindsey Benne Pound )

The latest look at crop production in the U.S. produced very few major surprises on Friday. Alan Brugler of Brugler Marketing and Chip Nellinger of Blue Reef Agri-Marketing joined “U.S. Farm Report” after the report was released Friday. Both said USDA’s newest projections in the September report were in line with what trade expected heading into Friday’s report.

“I think the biggest surprise of the most positive note was they did cut harvested acreage for Iowa by 550,000,” Brugler says. “That was on the high end of trade expectations. They also indicated that they might go further in October and that they were going to resurvey because some producers still didn't know whether they were going to harvest or zero it out for crop insurance. So, the possibility exists that corn number could end up being a little smaller than what we got today.”

In the September report, USDA cut the national corn yield forecast by more than 3 bu. per acre, to 178.5 bu. per acre. With the drop in acreage, along with USDA dropping harvested acres to 83.4 million for corn, the new corn crop production forecast now sits at 14.9 billion bushels.

“Obviously, when you go a little higher on the acreage reduction and the abandonment, then that tends to raise the average yield on the rest, just because you're not taking out some of the poor acres,” Brugler says.

“The question going forward to the market is going to be, 'Is this the first time USDA makes cuts or is there more to come,’” Nellinger says. “As Alan said, we have some frost damage in there, as well. The take-home for me is that at current face value, we have big crops coming still. And we have a harvest that is just starting. And so yes, we took the top end off with the dryness and then in the wind event in Iowa, but we're still looking at a lot of bushels.”

Nellinger says soybean prices around $10 are a sign to take some type of action, even with added demand and the recent cut to production. 

“The market discussion in the case of beans, with prices well over $1 higher than we were on the August report a month ago, to some extent, we’re going to have a lot of bullishness factored in.”

Nellinger says the demand story is big, with China continuing to make regular purchases of U.S. soybeans, but he says the funds are also getting into an excessive long position, and the crop size is still fairly big overall.

“You have to take a look, a realistic look, of what your expectations are,” he says. “When you're up here knocking on the door $10 soybeans, and you can be looking at the upper $600, maybe $700 plus gross revenue on beans, I think it's imprudent not to do something, whether that's some sales, some sort of a put strategy to lock the floor in. I think soybeans, obviously are screaming at me, to do something to protect it, even if it's just to put.”

Nellinger says a key factor to note is just how long the fund positions are at this point.

“Funds are getting close to 200,000 contract long position,” he says. “The most they have ever been long was 2012 about 240,000 contracts. So, they're getting into rare air up here, and eventually they're going to have their sale.”

Watch the full “U.S. Farm Report” marketing discussion below.