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Wash Journal   Fairfield Ledger
Neighbors Growing Together | Sep 20, 2017

Economist says supply, possible record crop leading to low soybean prices

Sep 07, 2017

By Brooks Taylor, Mt. Pleasant News

 

Soybean producers in Iowa have faced eroding or non-existent profit margins for the past year and the factors leading to it are beyond their control, said Chad Hart, an Iowa State University Extension economist.

“Soybean farmers are finding a lot of challenges,” he began. “Supplies are large from last year’s record crops in the United States and there could be another record crop this year. That is weighing heavily on prices. Last year, 4 billion bushels were produced in the country and this year might be a little larger, so it is a combination of a record crop followed by another record crop.”

Current prices are 30 cents per bushel (averaging now at $9 per bushel) lower than last year’s September prices, he noted.

Coupled with a record U.S. crop is a record South American soybean crop which floods the supply chain even further. “In 2016, we had the largest soybean crop ever produced in the world. There were 352 million metric tons produced and the forecast for 2017 is 347 million metric tons,” the economist stated.

The United States is the world’s soybean production leader but South America, namely Brazil, Argentina and Paraguay, had a crop of 175 million metric tons in 2016.

Hart said the major difference between last year and this year for Iowa farmers is that in 2016, there were phenomenal yields in Iowa. “Prices were low but the yields helped make up for it,” he commented. “This year we’re seeing still lower prices and lower yields which is a big hit for producers.”

The break-even point for soybean farmers, the economist said, is in the $9.60 per bushel range.

“Hopefully, we’re looking at some of the lowest prices now, which is usually the case when you get into harvest season,” Hart remarked. “Prices can rebound quite a bit. We saw a $1.25 (per bushel) swing from September 2016 and June/July of 2017. You can see significant movement over a year.”

Supply, not demand, is the major problem, Hart explained. He said demand for soybeans is as good as it ever has been. “We have been able to meet the demand and supplies are still going up.”

Expectations are for lower yields in Iowa, he said. Out of Iowa’s nine crop reporting districts, only the northeast and north-central districts are expected to see an increase in yields.

Exports, Hart noted, remain strong. “We spend a lot of time promoting soybean trade and it has paid off. The exports continue to grow at a phenomenal pace.”

China is the best customer, buying roughly 60 percent of the soybeans exported and 25 percent of soybeans grown in the U.S. The European Union is next at 8 percent; Mexico purchases 6 percent of the U.S. crop; and Indonesia and Japan are each at 4 percent.

Another factor influencing the soybean market is that other parts of the country “have really ramped up their soybean production,” Hart said. “Yields will be better in the southern and eastern part of the country and in some cases record yields.”

So what can Iowa farmers do? “Farmers are going to have to work their cost structure down, but there is only so much they can squeeze out of there. This year will be a financial noose and the year will be really challenging.”

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