The 2020 soybean season began with futures prices near $8.50/bu., relegating soybean production to highly productive acres for many producers across the Southwest. Good growing conditions for many areas lessened the concern for a breakeven budget, but strong yields would be crucial to success at this lower price level.
What could not be expected is the $3.50/bu. increase in soybean futures prices to end the year. That kind of a price move is not unprecedented but could not be counted on for farmers who have been dealt many difficult situations over the past decade. The steady increase in prices through the harvest season offered many selling opportunities to producers at prices above what was budgeted.
The November WASDE report calls for lower U.S. soybean production and ending stocks for the 2020/21 crop year. Production is 98 million bushels lower than the October projection bringing the forecast to 4.17 billion bushels. Lower yields in major growing areas like Illinois, Iowa, Indiana, Ohio and Nebraska are the main reason for the decline. However, total U.S. production is higher year-over-year given the 2019/20 production is estimated at 3.552 billion bushels.
Higher prices can be attributed to increased exports and continued production concerns worldwide. According to the November WASDE report, U.S. exports of soybeans increased to 2.2 billion bushels for the 2020/21 crop year, which is up from the 1.676-billion-bushel export estimate for 2019/20. This sets the stage for potentially the lowest U.S. soybean ending stocks in seven years.
The increase in the average U.S. farm price for soybeans is a boon for producers. The November WASDE report shows a year-over-year increase of $1.83/bushel. An average farm price of $10.40 coupled with an average yield per harvested acre of 50.7 bushels generates a total revenue of $527.28/acre.
What has transpired makes soybean breakeven attainable for more producers across the Southwest. With current farm price estimates and production projections, average soybean revenue has increased 30% from last year. This will not be indicative of every producer due to variations in local yields and prices but is a good sign for the industry.
The November Quarterly Agricultural Export Forecast offers further optimism for U.S. ag markets. Current forecasts offer an increase in U.S. agricultural exports for FY 2021 of $11.5 billion. This brings the total FY 2021 export forecast to $152 billion. USDA expects a record $26.3 billion soybean export value and corn is forecast at $13.2 billion. This is positive information for U.S. producers but creates a market that could experience varying volatility where corn and soybeans account for 26% of all ag exports.
The hurdle for producers now is price sustainability. Can price levels hold due to the current fundamental situation? The November 2021 soybean contract is trading at a $1.21/bushel discount to the January 2021 contract indicating some future weakness in prices. South American growing conditions and U.S. export sales continue to dominate trade news and will be critical to continued bullish price action.
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