Corn+Soybean Digest

Ag lenders concerned about soybean prices

Low soybean, corn and wheat prices have ag lenders nearly as concerned as growers heading into the peak of harvest and 2015. They’re also worried about reduced farm income, price impact on land costs and whether the rail-car shortage in northern states will impact grain movement elsewhere, says Dan O’Brien, Kansas State University grain marketing specialist.

O’Brien was among speakers during the annual KSU Ag Lenders Conferences Oct. 7-8 in Garden City and Manhattan. And like farmers, lenders were eager to see Friday’s USDA October crop production report and supply and demand figures.

In USDA’s estimates, the forecast is for soybean production at a record 3.93 billion bushels, up slightly from September and up 17% from last year. Yields are expected to average a record high 47.1 bushels per acre, up 0.5 bushel from last month and up 3.1 bushels from last year. U.S. harvested acres are forecast at a record 83.4 million acres, down less than 1% from September, but up 9% from last year.

Government soybean projections have been key in sending futures and cash prices crashing this summer and fall. Following Friday’s mid-day report, markets plunged some 20 cents per bushel on most soybean contracts.

November 2014 soybean futures closed at  $9.22 on Friday. January 2015 closed at $9.30 and March closed at $9.39. November 2015 closed at $9.45. There isn’t a $10 or higher soybean futures price on the board, signs that farmers are harvesting a massive crop. And lenders are well aware of price pressure.

 “There is sobriety among lenders at where soybean prices are now and where we were this time last year (near $12),” O’Brien says. “If anything, there is more concern on the lenders side about what impact low prices will have on land rents and farm income as we head into 2015.

“Lenders are concerned about the potential impact of rail transportation availabilities; how there could be a negative factor on farmers in Kansas and elsewhere if they cannot move major crops. They hope the issues with rail-car shortage in the Dakotas don’t impact us.”

With the big crops coming in and transportation snags, O’Brien says lenders worry whether “elevators will be offering bids if they are having difficulty in moving grain where it needs to go.

“Lenders at the conferences weren’t necessarily wringing their hands over low prices, but they were concerned about the challenges of where cash prices are, the level of forward contract bids and how farmers can make adjustments heading into 2015,” he says.

In a possible bright spot for prices, O’Brien says extremely low ending stocks reports for soybeans indicate “we are literally sweeping out the bins to see what we can find.

“As South America gets toward the end of its export season, the world will turn to the U.S. for soybeans,” he says. “The unwillingness of cash sellers to sell at low prices and buyers waiting to make purchases could lend some support to the bottom.”

TAGS: Soybeans
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