The South American soybean crop is still looking big. But drier-than-expected weather has some fearing Argentina’s production could be slowed, a sign that is helping bolster an “awfully strong soybeans market” for U.S. growers, says Dan O’Brien, Kansas State University grain marketing economist.
Chicago Board of Trade March soybeans beans had shrunk to below $13.50 in early January. But the futures contract began a steady climb in mid-month and continued to show strength from a rally that has helped push prices toward $15/bu. again.
New-crop November soybeans have also been on a climb, building from below $12.60 in early January to about $13.50 at the close on Tuesday (Feb. 5).
“Chances for a poor Argentine crop caused big jumps in the market last week,” O’Brien says, adding that reports of dry conditions are still in the forecast. “Also, they’re anticipating a major bottleneck and delays (in some South American ports) in getting soybeans out of the country. Their ports are jammed due to (overall) higher corn and soybean production.
“From March to April, there will be no place else to go for soybeans but the U.S. We should have an awfully strong soybean market for the short period of time.”
With the stronger market prices, there could be some opportunities for early 2013 sales, O’Brien says. Like other economists, he sees continued volatility in the market. And he knows if the Corn Belt is blessed with good seasonal rains, soybean and corn markets could easily start down on a hard note.
Again, U.S. prices will be greatly impacted by Brazil and Argentina production. Midwest Shippers Association indicated Monday that reports show cargo ships are headed south to greet the Brazilian harvest that is underway. Argentina will follow in March and April.
However, lack of adequate storage and port infrastructure could create congestion during the peak harvest and export season this year, Midwest Shippers reports. Thus, the short-term bottleneck indicated by O’Brien could maintain upward pressure on U.S. prices.
“Some early marketing by growers now may be feasible,” O’Brien says. “But with planting uncertainty, possibly the use of options to set a floor could be the best early strategy. If we get both a sizable South American crop and a sizable U.S. crop, there is potential for prices in the $10-$12 range.”