Soybean projections positive for Iowa farmers

June 18, 2020 | Bethany Baratta

The record large pile of soybeans the United States was facing in the 2018/19 marketing year has been chipped away at, and if the latest USDA projections are true, the nearly 1 billion-bushel stockpile of soybeans could be halved by the middle of next year.

The latest World Agricultural Supply and Demand Estimate (WASDE) report from the U.S. Department of Agriculture projects ending stocks at 585 million bushels at the end of the 2019/2020 marketing year, which ends in August. This is down from 909 million bushels from the 2018/19 marketing year. The USDA projects a further reduction of the stockpile—to 395 million bushels of soybeans—by the end of the 2020/21 marketing year in August 2021.

The reduction in U.S. soybean stocks comes as exports, soybean crushings, and use through biodiesel, food and feed are anticipated to pick up.

“We’re going in the right direction,” said Iowa Soybean Association (ISA) president Tim Bardole.

He says the industry’s top consumers—livestock and biodiesel production—continue to support to provide the most support to the soy complex.

“As a soybean association, the top things we need to focus on are the hard, fast, true markets that have been here: animal feed and biodiesel,” says Bardole, who farmers near Rippey. “We have to focus and keep those markets strong and expanding, but it’s also important to keep our eyes on new uses, like soy-based polymer and other opportunities.”

Exports expected to rebound

U.S. exports fell from 1.74 billion bushels in 2018/19 marketing year to an expected 1.65 billion bushels by the end of the 2019/20 marketing year in August-largely related to a reduction in sales to China. Exports are expected to rebound to 2.05 billion bushels by the end of the 2020/21 marketing year (August 2021).

“Our exports are off from where they were before the trade war with China, but we’re working our way back to that,” said Grant Kimberley, director of market development for ISA.

China is expected to increase its exports by 2 million metric tons to 96 million metric tons within the next marketing year. However, Kimberley notes those soybeans have largely been sourced from Brazil due to the differences in prices. Also, Argentina is a major soybean meal exporter and competes with U.S. soybean meal exports worldwide.

“Brazilian and Argentine currencies have dropped nearly 50% since the beginning of the year while the dollar has strengthened,” Kimberley said. “This has made it hard for the United States to compete.”

However, the U.S. dollar has weakened in recent weeks, which could result in larger purchases from China or from Brazil, which is expected to be oversold.

Phase one follow-through

 China following through on its ag purchasing commitments in the phase one deal with the United States could help bolster U.S. soybean exports.  However, the deal doesn’t spell out specific soy purchases.

It doesn’t appear China will meet its year one, phase one commitments by the end of 2020. This means farmers aren’t seeing a pickup in old-crop soybean sales once projected.

“We’ve heard a lot lately about China purchasing soybeans, but unfortunately it hasn’t been from the United States,” Bardole says. "It’s somewhat concerning, and I’m wondering how it will affect trade relationships if China doesn’t follow through on their commitments.”

The soybean purchases China has made from the United States are for new-crop soybeans, which doesn’t help soybean farmers struggling financially this year.

As a result, Kimberley believes a third round of Market Facilitation Program payments could be warranted due to the slower pace of old-crop sales.

The Iowa Soybean Association, in conjunction with Iowa Corn Growers Association and Iowa State University, is currently working on a study on ways to enhance U.S. exports to regain market share lost in the last several years due to the trade war with China. The study is also analyzing the impacts of currency depreciation in competing countries like Brazil and Argentina. The results of that study are expected soon.

Eyes on exports

There continues to be growth in soybean export sales to Egypt, Malaysia, Vietnam, and Bangladesh. The sales don’t offset lost sales in China, but it’s a start.

American Soybean Association (ASA) director Brian Kemp said continued efforts by the U.S. Soybean Export Council in building demand and preference for U.S. soy around the world are paying off.

“It’s important that we diversify our portfolio and continue to build relationships around the world,” says Kemp, who farms near Sibley. “We don’t want to eliminate China from our international portfolio; we want to keep that relationship going when the time is appropriate. We also want to develop stronger ties with other international buyers.”

Soybeans are a tremendous source of protein for people and livestock around the world, and the United States is positioned to deliver high quality soy to meet a variety of needs, says ISA District 1 Director Chuck White from Spencer.

“Exports continue to be a big part of our market,” says White, who serves on the ISA demand committee. “With the problems we’ve had in the last year with trade negotiations and Covid-19, it’s impacted our exports. But as we look into the future it looks optimistic that we’ll increase exports, reduce our stockpile, and hopefully have better pricing opportunities.”

ISA president-elect Jeff Jorgenson says the markets aren’t moving based on rumors as they once did; something has to happen before farmers see a price improvement.

The Sidney-area farmer hopes the USDA’s projections relating to exports and ending stocks come to fruition.

 “It’s a wait and see,” said Jorgenson, who serves on the ISA supply committee. “It’s kind of like our crop: we’re waiting and seeing what we have out there for a crop, but what we have for the moment looks pretty solid.”

Contact Bethany Baratta at bbaratta@iasoybeans.com.

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