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USDA report sends soybean prices lower

Article cover photo
Despite a tumble in soybean prices following today's USDA reports, Iowa Soybean Association leaders are hopeful for future demand. (Photo by Joseph L. Murphy, Iowa Soybean Association)

Soybean prices fell despite the government slightly reducing the size of the record crop today and China inking large purchase agreements this week.

Iowa Soybean Association (ISA) leaders view the setback as temporary, though, and have their sights set on the future.

 “Prices may have dropped, but I think they will recover,” said ISA President Bill Shipley of Nodaway. “Ending stocks are down slightly and China agreed to buy an amount that nearly rivals Iowa’s annual production. It’s a positive signal to the market that there’s good demand and we will move product.”

January soybeans on the Chicago Board of Trade closed at $9.86 per bushel, down 12 cents from the opening bell, after the release of U.S. Department of Agriculture Crop Production and World Agriculture Supply and Demand Estimates reports.

U.S. soybean production is forecast at 4.43 billion bushels, down 5 million due to fractionally lower yields, reports show. Soybean ending stocks are projected at 425 million bushels, 5 million less than October estimates. The national yield average and harvested acres remain unchanged from last month, pegged at 49.5 bushels per acre and 89.5 million acres, respectively.

Chinese soybean buyers agreed, in principle, this week to buy nearly 441 million bushels from the United States as President Donald Trump visited the country. Purchases are valued at $5 billion. During the 2016/17 marketing year, U.S. soybean and soybean product exports were collectively valued at nearly $29 billion (18 percent all U.S. food and agricultural exports), according to the U.S. Census Bureau.

Grant Kimberley, ISA market development director, said China’s purchase and reduced ending stocks weren’t enough to overcome otherwise “ho-hum reports.”

“Today’s USDA numbers don’t change anything now, but potentially down the road with strong demand being the ongoing story,” he said.

Kimberley says historically high ending stocks continue to place a drag on soybean prices. Exports, therefore, will be a key factor moving forward. China’s agriculture ministry increased its forecast for soybean imports today in the 2017/18 marketing year to 3.53 billion bushels, up 55.1 million bushels.

Market analyst Al Kluis, owner of Kluis Commodities based in Wayzata, Minnesota, suggests farmers keep a close eye on weather in Brazil and Argentina as soybean planting continues.

“Any type of weather problem in South America could provide marketing opportunities,” Kluis said. “It wasn’t long ago that we couldn’t comprehend using 4 billion bushels, but by 2018 we need it. Right now, rain in South America is underperforming.”

The USDA projects the state’s farmers will produce 557.2 million bushels of soybeans averaging 56 bushels per acre, both unchanged from last month.

“I’m very happy with soybeans,” said Shipley. “Overall, it’s probably the best crop I’ve ever grown.”

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