Part three in a three-part series on the soybean market.

Soybean prices have been mostly higher in recent months thanks to shorter 2020-2021 crops in the United States, Argentina and Brazil, higher demand for soy oil for biodiesel and an increase in shipments to China.

But, as farmers know too well, some of those demand factors and higher prices could be changing as soybean planting gets underway in Brazil and Argentina amid reports of more favorable weather conditions than those regions enjoyed a year ago.

“With this year’s favorable pricing environment relative to the last few years I think we’re creating a potentially nice runway for the U.S. soybean complex,” said Mac Marshall, vice president for market intelligence for the United Soybean Board and the U.S. Soybean Export Council.

“But I think we have to approach the balance of it under the assumption that we will have significantly greater supplies coming out of South America. I rewind to this time last year, and planting got off to a rough start in both those countries. Brazil was too wet and Argentina too dry, but I think we can expect something of a rebound in Argentina this year.”

See Part 1: Renewable energy demand pushing soy oil to the forefront

The slow start for the Brazilian and Argentine crops and lower than expected production in the U.S. helped push whole bean prices higher in the first four months of the 2020-21 marketing year. Then prices began to diverge as the Biden administration placed a renewed emphasis on renewable energy sources.

“We get to the end of March, and we get the planting report,” he said. “The markets were calling for a lot more corn and a lot more soy. Both came in short of expectations. During the next six weeks, as planting was starting to take off, you saw a substantial increase in soybean prices as the markets were calling for more and more acres.

Corn plantings

“But you also had corn prices appreciate at a faster rate during that time, too, so what we wound up with in terms of final planting was not too different from what was initially proposed, but the incremental area the market was looking for at the end of June was not meeting that. We had a runup in price; we had that $16.60 a bushel in old crop in May – the highest in 10 years. Since then, it’s been riding a weather market.”

On the day Marshall was interviewed in early October, November beans were trading for $12.80 a bushel or almost $4 a bushel lower than last May but still significantly higher than the early part of 2020.

“Obviously, weather has played a large role in many parts of the country – the flooding in the South, the drought in the north and in the Dakotas,” he noted. “I think we’re positioned overall to have a good size crop here, but not one that’s going to be overly onerous with inventories and drag down prices further.

See Part 2: Food vs. fuel or food AND fuel for soybean products?

“If you square what our expected production is against a likely strong export season once some of the port congestion gets managed and overlay that with what I think is a very favorable crushing environment, particularly when you see the component values on the oil side. You put all that together, and the projected carryover at the end of the year will probably remain tight.”

Although Brazil’s farmers experienced planting and harvest delays, they still produced a large crop in 2021 and are expected to continue to bring more area into production for the 2021-22 soybean growing year. Brazil could be looking at 140 million more metric tons of soybeans, assuming normal weather conditions.

The resulting ample supplies from South America could lend more credence to Marshall’s argument for fuel and food with both providing more demand for U.S. soybeans at a time when planting decisions are being made for 2022.