With harvest near and the recent WASDE report in the rear view mirror, there is little out there to push the market higher at the moment.
“The urgency is gone,” says Karl Setzer, a market analyst with Agrivisor.
Right now, Setzer says, the stocks-to-use ratios for corn and beans are going up, meaning that there is plenty of grain on hand to meet immediate demand. And with harvest around the corner, that isn’t likely to change in the next month or two. The biggest reason for that change is that the United States appears to have underestimated what is happening in South America.
This past year South America produced 137 million metric tons of soybeans. The estimate for next year is 144 million metric tons. At the same time, Brazil is building new export facilities that should reduce some of the barriers to export from that country and could make Brazil more competitive. Already, marketers in Brazil are offering January soybean sales at a 75 cent per bushel discount compared to U.S. prices.
That means the marketing window for this fall’s U.S. bean crop is really from about now until January. As South American producers continue to produce more and to build newer and more efficient export facilities it is starting to look like the United States will become the back-up supplier for the world while South America sets the world price.
“We’re still going to produce soybeans,” Setzer says. “But we are not going to be the ones setting the price.”
He says the United States can still do well if it puts even more emphasis on value-added products, selling pork or biodiesel to places such as China instead of just shipping beans there.
In the short term, Setzer says the market is offering little incentive to store grain past about January. If you have on-farm storage that may pencil out, but if not, there is little financial incentive to put grain into storage very far into next year.
Basis, however, could vary dramatically and there could be local rallies. For many farmers, keeping an eye on basis and selling into local opportunities may be a great idea.
