With 2020 in the rearview mirror farmers are looking for positive gains in 2021. (Photo: Joseph L. Murphy/Iowa Soybean Association
Soybean farmers turn their eyes to 2021
January 6, 2021 | Grant Kimberley
With 2020 in the rearview mirror (cue sigh of relief), soybean farmers turn their eyes to 2021 and what might be in store for agriculture and soybean farmers in the new year. Are the economics of agriculture returning to positive territory after seven years of economic hardship? Will the recent gains in the market price of soybeans hold? Will China keep buying? Will the pandemic ease, restoring consumer confidence resulting in busy restaurants, roads and airport terminals?
Absent a crystal ball, here’s what we know as a New Year begins:
1: Increased market prices have a lagging impact on a farmers’ bottom line. Many farmers sold soybeans into the rally when it began in earnest in September. That means soybean farmers have little inventory remaining to sell, thus limiting the opportunity to take advantage of soaring commodities prices. The biggest impact of this market turnaround will be to a farmers’ bottom line next fall and into 2022 (but only if the current rally can be sustained).
2: Demand rallies typically have a longer shelf life than weather markets. Dry weather in Brazil and Argentina, caused by La Nina, has impacted market sentiment. But more importantly, the bulls are running because of demand, led by a strong upturn in China pork production. Strong domestic demand from soybean processors and end users is also enforce. US demand for soybean meal due to increases in poultry and hog herds, plus strong biodiesel demand indicates the “dual value" of U.S. soybeans. Protein and oil are essential for life. Both are found in soybeans. And both are in high demand.
3: Soybean cash processing margins are excellent. So, combining record crush volumes with solid margins is a big reason for the strong soybean price.
4: The U.S. dollar is weak and getting weaker – both against the traditional basket of currencies, but, also against our No. 1 trade partner...China.
5: U.S. soybean farmers take pride in being a reliable supplier of quality soybeans. Argentina has again proven to be the world's most unreliable soybean meal exporter due to labor strikes. And Brazil is practically out of soybeans until harvest. The U.S. soy value chain is reliable, consistent, and resilient and is proving its worth again as we speed straight ahead into 2021.
6: U.S. soybean quality improved in 2020. The value of the just-harvested crop was up $.14-per-bushel versus the previous year due to improved processing yields (i.e. the amount of soybean meal and oil contained in the crop). Or, put another way, the value of the 2020 soybean crop was $600 million more than the ’19 crop! Processors and farmers share in that value!
7: You can’t underestimate the value of “CC” – or Covid Consumption. Even with restaurant demand dramatically reduced, consumer purchases for home consumption of poultry and pork kept feeders and meat processors very busy. Again, the flexibility and resiliency of the soy and meat supply chain was remarkable throughout the pandemic -- not only in providing protein and oil but repositioning the products where and when consumers needed them. Whether to enjoy at home or in their favorite restaurant, Americans demand high-quality protein and in all forms – meat, plant, poultry and dairy.
8: Industry support provided by the soybean checkoff ramped up during the pandemic. The soybean checkoff has continued to promote and assist users during the idles, shutdowns and lockdowns. The soybean checkoff has maintained direct contact with foreign and domestic users, government entities and farmers, even while travel and face-to-face meetings were impossible. Again, flexibility, adaptability and resiliency were hallmarks of the soybean checkoff real-time and during an unprecedented challenge.
9: Finally, U.S. soybean processors are crushing at record levels. Their investments are indicative of their confidence in the U.S. farmer to produce large soybean crops of good quality. They spent millions of dollars in the past few years to expand capacity to provide the needed soybean meal and oil. That investment has paid off for U.S. soybean farmers and the industries they own and support.
The year that was will forever be remembered for its challenges, unpredictability and, for too many, the loss of friends, family and loved ones. But with a new year comes renewed hope and the promise of new beginnings and better days. May they come to pass, and may we make the most of it to the benefit of our families, communities and country.