With More Acres and Growing Supplies, $6 Soybeans Possible

Clinton Tyne Soybeans
If the worst-case scenario plays out, Joe Vaclavik says you can't rule out the possibility of $6 soybeans. ( Farm Journal - Aimee Cope )

Rains continue to sweep across the country, soaking already saturated soils. The weather will push planting progress back even more, forcing some farmers to think about planting more soybeans. With both old and new crop soybeans posting fresh lows this week, Joe Vaclavik of Standard Grain says a move by farmers to switch to soybeans could be devastating for the market.

“The last thing that the soybean market really needs here in the U.S. is more acreage; we've got all the supply that we can handle at this point,” said Vaclavik. “Carry out is expected to double year over year, and when analysts go out into the 2019/2020  marketing year, things could get even worse. If we end up with the trend line yield this coming growing season, I think you could find a carry out that goes from, say 900 million this year, up to well over 1 billion next year”

Vaclavik said there’s no analog year for this scenario, which means soybean prices are in uncharted waters right now.

“You've got the projection for record carry outs, record stacks to use ratios, and we still have prices that are above the lowest levels that we've seen in the past 10 years,” said Vaclavik.

If a deal with China doesn’t happen, soybeans acres grow and more South American supplies come into the market, prices could push lower.

“I do not think you can rule out more downside in the market,” he said. “What sorts of prices could we see to the downside? If this worst case scenario plays out, it's tough to say. Could it be something in the $7 range? Sure. Could it be something in the $6 range, I suppose that's possibility.”

Vaclavik said there could be some positive news coming through, as optimism is starting to turn higher on trade talks with China, while short fund positions need to be covered.  

“Maybe we do get a trade deal, maybe China commits to buying a whole bunch of U.S. old crop soybeans, and that's something that really helps us,” he said. “That's a ‘maybe,’ but certainly not a guarantee at this point.  The soybean market very much fighting an uphill battle as we move forward.”