Hammer Down on Soybean Planting as China and the US Imply Soybean Peace

The last few days I’ve been busy spreading fertilizer and burning down for my impending soybean crop, which I hope is better than last year. It’s kind of funny, last year’s crop was slightly better than average, but it was much below the record from the previous year. You might remember the column I wrote a couple weeks ago about not getting too greedy. Maybe I should take a little bit of my own medicine.

The land is drying out near Dresden Ontario. It is been a very uneven spring for me as untimely rains have held things up. However, I must admit that I’m always somewhat of an advocate to plant soybeans later in May and even early June. It does not seem to have the detrimental effect on yield for me and my fields tend to be a lot cleaner. It seems on burn down, I kill a lot of weeds that wouldn’t be up earlier in the month. In 2018, we had the coldest April in 45 years, so maybe that explains why I don’t see as many weeds as usual. At this point, it’s a long way to payday. Everybody can be a smart guy now.

In Ontario, cash corn off the combine is currently worth about $5 a bushel was soybeans approaching $13. It is that critical time in the marketing year when new crop futures months strain to reach their high. For instance December corn reached its high last year in early July, while the year before it reached its high on June 18th. With December corn currently trading at approximately $4.29, we’re pretty high already compared to the past two years. Soybeans at $13 always get a lot of friends when they hit those levels.

Of course, the big news this week with regard to soybeans was the implied thaw in relations on the soybean front between China and the United States. You might remember in April when China was proposing a 25% tariff on over 16 billion of US agricultural commodities, with soybeans being a $14 billion share of that last year. At the time I looked at this is so unnecessary, as a response to the rhetoric coming from the American administration. This week there was an announcement by both the United States and China that cooler heads were prevailing, maybe.

Any type of return to common sense is always a good thing and the soybean market responded by a couple days of going up aggressively. President Trump responded on twitter by saying the potential deal that they had hoped to reached with China will guarantee that they will purchase from the US as much as American farmers could produce. This was in the same week when he said Canada was acting like a spoiled child and were very difficult to deal with in NAFTA negotiations. With that as a backdrop, I found the latest news about China and soybeans a little hard to take.

Of course, there is always a bit of a smokescreen in Asia. As you know I travel to that region often if you consider six trips in the last 25 years often. When you walk the streets of Asia you can pretty well taste the pent up agricultural demand, which wafts through their streets. There is a great need to import agricultural commodities to satisfy food demand. At the same time there is a different culture and a large informal economy at work, which has no rules. Add corruption into the mix and you get a special potpourri of what actually works in Asia and what does not. Coming to agreements with Western nations on food commodities comes with its own special peculiarities.

The Chinese also announced last week that they were dropping the 178.6% antidumping tariff put on US sorghum products. This was a precursor to the new implications on Chinese soybean imports. So it’s difficult to tell exactly what’s going on, but punitive trade actions on food commodities doesn’t make a lot of sense from an Asian perspective. Life has a different value their, than it does in a more food rich society like the United States and Canada. However, the drive for more protein keeps increasing and the Chinese leadership cannot ignore it. Coming to some accommodation with the Americans over soybeans will ultimately lead to cheaper soybeans. The more global production spurred by the threat of tariffs will take some time to ramp up.

In the meantime Ontario is expected to grow about 3 million acres of soybeans this year, with Manitoba cutting back on their production while neighbor Saskatchewan increases their production. You might have read it here through the years that I call soybeans the great liars. That’s because during the growing season they tend to look better than they really are but at the same time it can be the opposite. Sometimes they look pretty poor, but completely exceed the yield expectation.

My challenge in the soybean riddle begins today when I start planting my 2018 soybean crop. I hope I only have to plant it once, but invariably there always is a replant. Yes, I hate when that happens, but its just part of the risk management profile. So as I put the hammer down, let’s hope the United States, China soybean trade leaves all the posturing behind. Soybean producers and end-users could use some certainty. Our soybean market needs that as well.

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