Soybean Prices To Stay Low Despite Strong Consumption

Between the anticipation of high soybean yields, and the current trade spat, soybean prices have yet to rebound from a nosedive this spring. However, soybean crush and exports over the past two months show increased use.

Trade disputes with China led to a 25% tariff by China on U.S. soybean imports, dropping soybean prices for U.S. farmers, says Todd Hubbs, University of Illinois ag economist. “Concurrently, soybean prices in Brazil strengthened as China focused on Brazilian soybeans for demand needs.”

The U.S. found alternate countries for soybeans, too. In June, export numbers from the Census Bureau showed exports up 54 million bu. over last year. Mexico is up six million bu., Netherlands up 11.5 million bu. and Pakistan is up 14.5 million bu. 

“A continuation of export strength to other markets than China is key to the prospects for exports in the 2018, 2019 marketing year under the current escalating trade situation,” Hubbs says. USDA export projections this marketing year are at 2.085 billion bu., with 1.961 billion bu. through Aug. 2.

To meet USDA export estimates, soybean exports need to average 18.2 million bu. per week over the next month, and they’ve averaged 27.8 million bu. the past four weeks. 

“The current pace of exports appears to be on track to meet and possibly exceed USDA projection,” Hubbs says. Soybean crush continues to show strength, too, namely with the drought in Argentina.

USDA projects 2.03 million bu. of crush for the 2017, 2018 marketing year. 

Despite soybean consumption, the potential for a large soybean yield this year is helping keep prices down. As of the most recent Crop Progress report from USDA, 70% of soybeans are rated good to excellent. Time will tell what actual yields are, namely for states in drought conditions.

“In total, 15% of soybean acreage is currently experiencing drought conditions,” Hubbs says. “While the current USDA yield projection for the 2018 crop year is at 48.5 bu. per acre, the likelihood of a higher soybean yield projection in the August 10 crop production report is increasing due to the excellent condition of the crop in many key growing areas.”

Hubbs is forecasting the national soybean yield to jump to 50.3 bu. per acre. The potential for high yields in both the U.S. and South America, combined with trade uncertainty will likely continue to keep soybean prices under pressure despite consumption.