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Time to get aggressive hedging next year’s soybean crop?

Getty Images Soybeans
Four reasons why we may see huge soybean supplies next year.

This week’s blog will be very direct. AgMarket.Net is moving to 50% sold/hedged on November 2022 soybeans. We feel there are several mounting factors that could completely change the landscape of new crop soybean values heading into next spring.

Fertilizer shortage

First on the list is the elephant in the room: the price of fertilizer and how the global shortage has and will continue to impact the cost of growing a corn crop. By most accounts, the rise in fertilizer cost has added at least 50 cents/bushel of cost to plant corn. We feel this will drive more domestic acres to soybeans. Looking at both varieties of winter wheat offering over $7 for new crop, we also consider the potential for double crop soybeans behind wheat as an extra nudge in this direction.

Some are asking whether we will even have enough fertilizer to plant 90 million acres of corn; rumors are, the biggest distributor of fertilizer in the world is looking for available supply from other providers. Some producers are aggressively buying because their suppliers are only saying it’s going to get worse, assuming they can get it, while other producers will put off the decision until spring. If that’s the case, corn will have some work to do next spring to take some of those acres back.

Yield advantage?

The second concern is anecdotal at this stage, but our conversations with producers have led us to believe that soybean yields are performing better versus expectations for corn yields. While late season disease has taken the top end off corn yields in the Eastern corn belt, by most accounts soybean yields are overperforming. Every personal conversation I’ve had this week with an Iowa producer has left me feeling like the Iowa soybean crop will be a monster.

If that is indeed the case, those producers may jump at the opportunity to put more soybeans in the ground next year with futures at $12.50.

Chinese imports

Third, If you haven’t been paying attention to the pace of new crop soybean sales, well let’s just say that Chinese buying really needs to pick up. Comparing their current pace to last year’s buying is tough because China was buying everything with both hands last September. On top of that, the inability to ship volume due to Hurricane Ida has caused China to look to Brazil for short term needs.

One must recognize that China’s plan to reduce their hog herd by roughly 10% from the most recent peak of nearly 46 million will have an impact on Chinese feed needs.

Finally, South America

The last piece to the puzzle will be South America’s crop. As dry as Brazil was this time last year, they still managed to produce 137 MMT of soybeans. The drought persisted, causing havoc on the Safrinha corn crop. But what if early estimates of a 140 MMT+ Brazilian soybean crop evolve into 145 MMT with decent weather? Most meteorologists we follow are saying early October rains look likely which would already change the dynamic from a year ago.

Rains in Southern Brazil are adding confidence in planting first crop corn and early soybeans.  Should Mato Grosso get timely rains, it could be quite some time before we’re dealing with a legitimate weather concern in South America.

Reach Brian Splitt at 847-946-2080 or [email protected]AgMarket.net has implemented multiple strategies over the course of the past week to protect new crop soybean values. As always, feel free to contact me directly at 815-665-0461 or anyone on the AgMarket.Net team at 844-4AGMRKT.

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