U.S. farmers are taking advantage of a surge in soybean prices and have sold ahead up to half what they expect to harvest this year, as huge global supplies and a record South American crop coming earlier than usual bode ill for later sales.
Chicago Board of Trade November futures, which reflect the 2017 harvest, touched a two-month high on Friday and are up about 3 percent so far this month. That has lifted cash prices in some areas to over $9.50 a bushel, a level which should ensure a profit for farmers barring a major crop shortfall.
Citizens LLC elevators in southern Michigan have forward-contracted, on average, about 35 to 40 percent of farmers’ expected 2017 soybean crop, the highest percentage for this time of year in at least a decade, said Angie Setzer, vice president of grain at the elevators.
Farmers in Brazil and Argentina are expected to harvest 159.5 million tonnes of soybeans this year, 6 percent more than the previous year, according to the U.S. Department of Agriculture (USDA).
“With the size of the South American crop that’s been discussed, and the likelihood of us planting 88 to 90 million acres of soybeans, and without some major production issue … we really need to make sure we’re locking in profit when possible,” Setzer said.
In Iowa, the country’s top soy producing state, one grain merchant at a cooperative estimated his customers have sold 10 to 15 percent of their anticipated soy crop, but just 1 or 2 percent of their corn.
“We’ve had more guys hedging beans this year after the rally. For corn they see no point in locking in a loss this early,” said the merchant who asked not to be identified because he is not authorized to speak with media.
There is no publicly available data on forward sales by U.S. farmers. Grain companies, elevators and farm cooperatives often make estimates based on expected production in their draw areas, but those figures vary from state to state and region to region.
The race to sell soybeans is more acute this year because South America’s crops are coming in faster than before.
Brazil’s soy harvest is already 18 percent complete, ahead of the five-year average of 10 percent.
“Despite minor isolated delays, the harvest is evolving fast,” said Aedson Pereira, grains analyst at Informa Economics FNP. He said states such as Rio Grande do Sul, Minas Gerais and Matopiba could have soybeans on the market in March or April, a month earlier than usual.
Brazil’s monthly export capacity last year reached 11.8 million tonnes a month, a result of investments in ports and shipping infrastructure. Exporters shipped over 10 million tonnes of agricultural goods last April, the most in a single month.
Industry sources expect peak Brazilian soy exports from March to May, and Brazil’s harvest, estimated at 104 million tonnes or more, could ensure competition well beyond the traditional export season that normally winds down in September.
Soybean prices are among the few bright spots for U.S. farmers facing a fourth straight year of declining net farm income in the worst farm economy slump since the 1980s.
That could prompt many to favor planting more beans over corn this spring if crop rotations allow, adding to already huge supplies.