Bearish hit affects soybeans

August 15, 2024 | Kriss Nelson

The August World Agricultural Supply and Demand Estimates (WASDE) proved bearish for soybeans after announcing an increase in planted acres and estimated yield.

After reviewing planted acres, the United States Department of Agriculture (USDA) discovered that farmers had planted an additional one million acres of soybeans since the release of the Acreage Report in June, bringing the total to 86.3 million harvested acres.

Along with more acres, the USDA also raised the projected soybean yield to an estimated record of 53.1 bushels per acre – a record high.

“This is putting a lot of pressure on soybean prices,” says Al Kluis, managing director of Kluis Commodity Advisors, adding that soybeans have been trading at the lowest price since Sept. 2020.

Lindsay Greiner, former ISA president and farmer from Keota, believes the updated soybean acreage numbers could be correct, but is hesitant to believe we will harvest a record soybean crop.

“Although the weather is good for the development of soybeans right now, I question whether the yield estimates may be too high,” says Greiner. “With the current conditions of high humidity and moisture, that could be cause for disease that can hold yield back. Time will tell. For me, it’s hard to guess soybean yield until we pull into the field with the combine.”

The USDA estimated that U.S. farmers planted 90.7 million acres of corn, which is lower than the earlier projected 91.5 million acres. The USDA also raised yield estimates for corn to 183.1 bushels per acre.

The delayed planting due to excessive rain is most likely the culprit to the switch in acres.
“As it got later in the spring, farmers in the northwestern Corn Belt dropped their corn acres and switched to soybeans rather than filing prevent plant (claims),” says Kluis.

The report had the predicted effect on the markets, causing soybean prices to fall after hitting a low before the report.

The release of the August WASDE caused November soybeans to drop to a contract low of $9.75 per bushel and ultimately close for the day down 16.5 cents at $9.86 per bushel.

After hitting a new contract low of $3.90 prior to the report, corn was slightly affected, and December corn traded up 6.5 cents at $4.01 per bushel.

Looking ahead

Kluis says there is a good chance USDA will raise the yield projection again in the September WASDE report.

“We have a very large crop coming at us, and the current low futures price has discounted a lot of this larger crop,” he says.

For managing sales for the 2024 crop, Kluis advises riding out the storm.

“Farmers have the worst of both worlds right now. A low futures price and a wide basis,” he says. “I advise figuring out a way to store grain and not make any sales until late November or December. This is not a time to be selling anything.”

Greiner hasn’t made any definite marketing decisions. Typically, he would have 15% to 20% of his corn and 30% of his soybeans forward contracted by this time of year, but he has held on.

“I feel like an ostrich with my head stuck in the sand,” says Greiner. “Because of the downward price trend after planting and the uncertainty surrounding yields and market conditions, I have made no decisions regarding this year’s crop.

“I think what I am open to is markets hitting bottom soon. Yields will not be as good as USDA says, and we will get a little bounce in the market.”

Kluis suggests this is a good opportunity for livestock farmers seeking to buy corn and soybean meal.

Timing could be the key

During a Current Market Landscape webinar as part of ISA’s Summer Soy Series programming last week, Kluis provided his take on where markets are heading and what farmers can do to catch an opportunity to be profitable.

“What I learned a long time ago about charting markets and setting price targets is to keep in mind timing is always important,” says Kluis.

Looking back to the 2023 marketing year, Kluis says they advised customers to sell a lot of crop during the week of Thanksgiving and ended up being one of their better sales for the year.

“Very often, during the week of Thanksgiving, you see a nice post-harvest basis appreciation, allowing you to turn your stored grain into cash and generate the money you need for January and February to make land, rent and equipment payments,” says Kluis. “It can be a very key week.”

Another critical week to consider is Jan. 17. And a week to avoid: the last week of February. Kluis says with forced cash sales from farmers needing to fulfill financial commitments such as land payments and equipment payments and more that are typically due March 1st.

Initial price targets

Kluis says he is targeting prices for soybeans to reach $11.55 to $11.85 per bushel. Right now, that is well over a dollar a bushel away.

“Historically, based on post-harvest lows to the initial phase of a rally, you usually get 80 cents to $1.15 a bushel,” says Kluis. “These may need to be adjusted lower. But again, the key is to position your farm to not give up any ownership on a wide basis in September and October.”

Kluis has estimated the target price for corn at $4.65 to $4.77 per bushel.

“Corn prices may have to be adjusted down as well, but I think it is always important to say if you are going to tell me the market is going to rally, I want some price and time targets,” says Kluis.
Low prices do not have to create low profits.

Last March 15, many farmers signed up for Agriculture Risk Coverage (ARC) crop insurance. According to Kluis, it is the most enrolled program and can pay between $70 to $90 per acre. Kluis suggests farmers visit with their crop insurance agents to learn more about Revenue Protection (RP) crop insurance.

“I view crop insurance as a big put option. Add up the source of selling your crop, the source of selling your crop, the RP crop insurance indemnity payment, and the possible payout on ARC; be aware that these are all available to you,” says Kluis.

South America

Corn stunt disease hit Argentine farmers this year, bringing an average yield of 103 bushels to the acre. Kluis says prices cannot cover their costs, forcing Argentine farmers to cut their corn acres by 30%.
“That could be friendly to our corn markets, but bad news for soybeans. If they cannot plant corn, they will go to soybeans,” he says.

Brazil is estimated to increase acres by nearly 3% next year, compared to their average increase of almost 6%.

“They don’t have the access to the capital markets we have in U.S. agriculture,” says Kluis. “They fund these expansions with profits from the previous year, but they weren’t there this year.”

What goes up must come down

Reflecting on the higher prices for a good part of the past decade, Greiner says he believed we are only a few big harvests away from low prices, and that time has come.

“That is the nature of farming,” says Greiner. “We have enjoyed several years of prosperous times and are headed for a downturn. Now is the time to tighten the belt, watch your expenses, and hopefully get by with the improvements you have made during the profitable years.

“I am concerned for the younger farmers—my son, who is in his mid-30s, farms. I have been telling him that when you are making money, you should set aside some for the rainy days that are coming. I think they are coming.”

Farmers will have the opportunity to meet with Kluis at the Iowa Soybean Association booth, number 9200, located in the Varied Industries Tent during the Farm Progress Show on August 27 and the morning of August 28.

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