Who Wins The Price War of Soybeans?

Get the Ag Futures & Options Self-Study Guide from ADM Investor Services

Get your complimentary copy of the Agricultural Futures &Options Self-Study Guide, brought to you by ADM Investor Services. Youll find market concepts, terminology, strategies, and a market intro in this informative 72-page booklet. Self-study quizzes monitor and test your progress throughout.

Get your Complimentary Copy Today!

At the end of the month there is going to be a USDA Grain Stocks Report and a report on estimated U.S. crop plantings. As of the January 12, 2018 USDA Quarterly Grain Stocks Report, U.S. farmers had 9 percent more soybeans stored than a year ago in 2017. Corn stocks were up 1 percent and wheat was down 10 percent.

Remember for the Jan 12, 2017 report, corn stocks were up 10 percent, soybean stocks were up 7 percent and wheat was up 19 percent.

For the March 31, 2017 report corn stocks were up 10 percent from March 2016, soybean stocks were up 13 percent and wheat stocks were up 21 percent.

I see U.S. corn and soybean stocks for March 2018 are going to be more than 2017. Wheat is a toss-up. There has been a lot stored, but usage is going to be up in my opinion. Its has been a cheap grain to feed with a wide basis.

Plantings could see less grains for plains states. The wide corn and soybean basis in Kansas and the Dakotas shows wheat taking corn and soybeans in Kansas. The Dakotas have a wide basis on corn and soybeans and it is possible to see a shift to wheat especially if they took advantage of the rally last summer and hedged. The soybean basis is horrible in the Dakotas and farmers have to be better accounts and crunch numbers to see what they will plant. I cant see more beans going in this year. But beans did the best of all crops and that often determines what is planted the following year.

But it will be a surprise, a big surprise, if the report doesnt show U.S. farmers planting more soybeans. Several seed companies claim record beans sales are taking place The RMA price at $10.16 for beans versus $3.96 for corn should get more beans in the ground. Also, I feel it is very likely that nearly 20% to 25% of U.S. farmers cannot get enough on an operating loan to plant corn, so they will plant soybeans.

As I write, May Soybeans are near $10.42 and July beans about $10.52. August soybeans are near $10.54 and September $10.43 with November at $10.37.

As of March 12th, the last basis bids I saw for Argentina, the basis improved from May to September by about 20 cents. It was the same as it was in Brazil. It appears buyers are wanting to shift sales from harvest to times beans are less likely to move. It is similar to what happened last year in the U.S.

Also, Argentine farmers have a half percent of export taxes removed each month over two years beginning January 2018. From January through August they lose 4 percent off the 30 percent export taxes and from August to October they lose another 1 percent. So why would Argentine farmers sell out of the field a short soybean crop for $10.32 when they can save and get the same price less 4percent or 5 percent export taxes plus pick up 20 cents in basis. At 4 percent they pick up about 41 cents and at 5 percent they pick up 51 cents at current prices and get a better basis.

By the way, if they do contract now for September delivery or later, it is when U.S. farmers will be starting to harvest and sell their new crop.

It is very likely that corn will move first in Argentina and soybeans will move later during the U.S. harvest in the year U.S. farmers planted more soybeans.

For well over a month reports have concentrated on Argentina and once in a while there is some news about Brazil. The March WASDE Report put Brazils crop below reports that Brazilian agencies and analysts did two to three months ago. The USDA estimated Brazils crop at 113 million metric tons. I am sure farmers in Brazil are very pleased U.S. estimates are as low. The reports from Brazil re-estimating a low side at 15 million metric tons to over 117 mmt. Even if it is near the USDA estimate, it means Brazil needs to sell from harvest well into 2019. Guess what? Brazil will also be selling when the U.S. harvests.

Who is going to win the price war in soybeans? It is an easy answer. It will be the grower or speculator, those that take advantage of plans made on risk management, versus hope. It is the same for the speculator. Know that markets are volatile. Have enough equity in an account to take the day to day bounces and have exit plans and know the risks.

Get the Ag Futures & Options Self-Study Guide from ADM Investor Services

Get your complimentary copy of the Agricultural Futures &Options Self-Study Guide, brought to you by ADM Investor Services. Youll find market concepts, terminology, strategies, and a market intro in this informative 72-page booklet. Self-study quizzes monitor and test your progress throughout.

Get your Complimentary Copy Today!

Call me at 913.787.6804 or email me at chris.lehner@archerfinancials.com to learn more about these markets.

Would you like to open an account with Chris? Go to our interactive New Account application at Open An Account. It is fast, saves on postage and its green.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. Past results are not indicative of future results or performance. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.