Soybean Market Support Continues as China Relations Thaw

Soybean farmers have seen a welcome uptick in prices over the past few weeks. The market is enjoying sustained support from the late October framework agreement with China, as well as a flash sale announced by the USDA on Friday, November 28^th. While the China agreement is positive, grains and oilseeds economist Tanner Ehmke with CoBank in Denver, needs more information before the full extent of its impact is known.

“We're still waiting on details of the agreement between the US and China, so we need to see what that looks like before we can start making any real projections on future purchases,” said Ehmke, during an interview with the South Dakota Soybean Network at the National Association of Farm Broadcasting convention in Kansas City. “But if you're in that area where you're highly dependent on the export market and your basis is fairly weak, there's a clear issue there where local cash prices are below your cost of production.”

On a more localized view, Ehmke points to the general expansion of soybean processing, and specifically for growers near it, the plant that went online near Mitchell, South Dakota, late this past summer.

“We've seen a tremendous build-out of soybean crush capacity in the U.S.,” he said. “And if you're in one of those areas where you've seen new demand develop from the local crushers that are producing veg oils for renewable diesel and biodiesel, then you've seen a material change in your local basis. And that's been a positive. But if you don't have that advantage of a strong local market, if you've been entirely dependent upon the export market, then it's been a different story.”

Despite the climbing market, profits remain elusive because the high price of inputs means the cost of production keeps rising.

“Clearly, soybean prices have recovered over the past month with the news of China buying from the U.S. That's been a huge positive,” said Ehmke. “And so, for some producers who've been able to benefit from not only the rise in the flat price on the board, but also strengthening local basis, there might be an opportunity to market at a profitable level, or at least closer to a profit – more profitable than you had before.”