Ankeny, Iowa — Soybean prices hit lows not seen since December 2008 as the U.S. Department of Agriculture (USDA) released its World Agricultural Supply and Demand Estimates (WASDE) report today. The report forecast 2018-19 U.S. ending soybean stocks at 995 million bushels, up 100 million bushels from the April forecast. July 2019 soybean prices dropped 14 cents to $7.97 immediately following the release of the WASDE report.
Average soybean prices are expected 45 cents per bushel lower at $8.10 per bushel.
While Al Kluis of Kluis Commodity Advisors expected larger supplies, it was far beyond the 925 million bushels the firm projected prior to the release of the report.
Larger global stocks—specifically forecast record soybean production in Brazil—contribute to an already glutenous soybean supply. Brazil is forecast to produce 123 million metric tons of soybeans, up 6 million tons from the April forecast. Those large supplies, mixed with trade uncertainty and weakened demand due to the African swine fever (ASF) hit soybeans hard, said Iowa Soybean Association (ISA) President Lindsay Greiner.
“It’s a multilayer problem,” said Greiner, a crop and livestock farmer from Keota. “Large supplies weigh on the market and bring prices down, but then we also have an ongoing trade dispute with China and a decrease in soybean demand due to ASF. These low prices are a product of those negative factors.”
“This is one of the most challenging periods of time we’ve faced in agriculture since the ‘80s,” said Grant Kimberley, director of market development for the ISA. “Stocks are so large, competition is so strong from other parts of the world, and we don’t have access to the largest market in the world which accounts for 60 percent of global soybean sales.”
As farmers continue to see prices well below cost of production, U.S. Agriculture Secretary Sonny Perdue announced today through Twitter that the USDA, at the White House’s request, is looking at a potential second aid package, though no details have been provided.
The tweet came as Trump and U.S. Trade Representative (USTR) Robert Lighthizer said they were hiking the tariff rate—from 10 percent to 25 percent—on $200 billion worth of Chinese goods. Trump confirmed today that USTR had begun the process to add a 25 percent tariff on an additional $325 billion worth of Chinese goods.
Soybean farmers still prefer trade deals over aid packages, Kimberley said.
“We continue to work to develop new markets, and we’ve captured more market share in the rest of the world, but unfortunately in the short term that’s not enough to offset the absence of China for the U.S. market,” he said.
Developing markets and firming up trade deals is critical, Greiner said.
“These expected large supplies underscore the importance of trade,” Greiner said. “Ratifying USMCA (the U.S.-Mexico Canada Agreement) and a trade deal with China is probably the most important thing we could do right now to get some certainty back to farmers and the market.”
Partially funded by the soybean checkoff
The Iowa Soybean Association (www.iasoybeans.com) develops policies and programs that help Iowa’s more than 40,000 soybean farmers expand profit opportunities while promoting environmentally sensitive production using the soybean checkoff and other resources. The association was founded in 1964 and is governed by an elected volunteer board of 22 farmers. It strives to be honest and transparent, fact-based and data driven and committed to environmental stewardship, collaborations and partnerships.