Once-reliable soybeans now bring nothing but unanswered questions. What will tariffs and trade agreements mean for export opportunities? How will prices respond with or without successful trade policy? Finally, does political uncertainly make the legume too risky to plant in 2019?
The October Ag Barometer, produced by Purdue University and CME Group, indicates farmers are confident that soybeans will have better prices in 2019—which means they’re confident a trade deal will be reached. Of the 400 farmers surveyed, 39% expected higher soybean prices a year from now and 49% said prices would be at least as high as they are now.
“How tariffs are or are not resolved will have a huge impact on prices, and as we work on our new baseline that comes out in March we’re assuming the tariffs are still in place,” says Pat Westhoff, University of Missouri Food and Agricultural Policy Research Institute (FAPRI) economist. “If tariffs continue current market prices are too high—they will go lower. However, the opposite is true, too.”
He cautions farmers who are storing soybeans because they might not find that “perfect” time to sell if tariffs stick around. With higher production and carryover, USDA estimates farmers will have 955 million bu. of stocks on Sept. 1, 2019.
Many farmers are confident the Trump administration will tackle trade issues and resolve their pricing and carryover concerns, however.
“We said, ‘Compared to 2018, what are your plans with respect to planting soybeans in 2019?” [and] roughly three-fourths of them said they’d keep their soybean acreage unchanged in 2019,” says Jim Mintert, Purdue University ag economist, of the October Ag Barometer survey.
Still, other experts suspect soybean acreage will drop despite apparent farmer optimism. USDA puts soybean prices anywhere from $7.35 per bu. and 9.85 per bu. next year—that wide variability no doubt due to uncertainty in exports. FAPRI’s August baseline pegged soybeans at $8.73 per bu.—the lowest level since 2007.
“If the tariffs are still intact I estimate we’ll be down at least 10% of overall acres, maybe closer to 15%, but that will be regional,” says Shawn Conley, University of Wisconsin Extension soybean agronomist. “We’ll lose a lot of soybean acres in North Dakota, South Dakota and Minnesota—much of that goes to the Pacific Northwest and no one is transporting there. We’ll lose acres in the Midwest but probably only a 5% or-so shift.”
Bankers will influence the number of soybean acres in the Midwest because it’s a lower-cost crop, too, Conley adds. “Without that I think we’d see a bigger shift with that tariff.”
Farmers who plant soybeans next year will need to keep an eye on risk. Successful tariff and trade with China presents great opportunity but if the deal doesn’t get signed quickly plan to cut costs and remain profitable despite tight margins.
“Think about profitability by acre, match inputs by individual field,” says Mark Licht, Iowa State Extension agronomist. “Maybe we don’t do preventative treatments and instead increase scouting. And strategic marketing should be part of your plan moving forward.”
Certain farmers who took advantage of market jumps this season achieved $10 per bu. in some cases. Profit opportunities will likely present themselves despite tariff and trade uncertainty, Conley adds. Know when to pull the trigger.
Trade and tariff implications stretch beyond 2019. Even when the trade war is resolved the export market to China won’t bounce back immediately.
“Brazil will have no problem converting land to soybean production and eastern Europe is a buzz about soybeans—we’re on track to lose a significant part of that [China] market if this is long term,” Conley says.
Westhoff draws comparison to the Russian grain embargo—while there are many differences there could be one important similarity.
“This isn’t just about the effect on supply and demand, to a certain degree this will be seeing who swaps trading with who,” Westhoff says. “If this is resolved quickly we should bounce back in a year or two. The problem with longer term is, like with the Russian embargo, we could see other countries change trade and domestic support policies to be more self-sufficient.”