In our weekly series From the Furrow, host Mike McGinnis and fellow grain geeks shed light on current market conditions and how grain producers can take action to manage their risk.

This week, Mike is joined John Baize, Consultant for the US Soybean Export Council. In what markets could US soybean exports gain share? Could dryness in Brazil open new opportunities for US soybean shipments? Mike and John discuss those topics and a whole lot more.

Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].

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Hello and welcome to From the Furrow, brought to you by Ever AG Insights. Each week we talk with subject matter experts on news and topics affecting the grain markets. I’m your host, Mike McGinnis, and today we get started with the review of the markets. Today is Tuesday, September 17th, 2024. And we have mixed markets. The December corn contract is trading down one and a quarter cents at 409.

00;00;39;21 – 00;00;58;21

Meanwhile new crop November beans up three quarter cents at 1008. The Chicago wheat market right now down six and three quarters at 571. Turning to our guest this week, it’s our privilege to have John Bass. He’s a consultant for the U.S. Soybean Export Council. We want to thank John for joining us today. John.

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Good morning.

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How are you?

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Doing very well. Interesting times we’re in now.

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It is. And we’re going to talk about the challenges, the headwinds of U.S. soybean exports and all that. Go with that. We have a lot to talk about. So let’s dig right in. Let’s talk about the soybean exports slowing for the 20 2425 marketing year. This comes at a time when the USDA expects a record crop to be harvested here soon.

00;01;22;04 – 00;01;45;10

The U.S. has so far sold less than 5 million tons for delivery in the 20 2425 season, the lowest in 16 years outside of the 2018 2019 trade war year, down 25% from a year ago. So we have some headwinds already going into this marketing year as far as soybean sales, can sales improve if China doesn’t buy? That’s my first question to you, John.

00;01;45;15 – 00;02;09;09

Well, it’s going to be difficult, but I fully expect China to step up soon. What we’ve been going through here is a period of prices declining for quite a while, and now we look like we’ve reached the floor. And that’s when you tend to see people start buying, including the Chinese. I think the Chinese are looking at the South American situation now and realizing the crop in Brazil, particularly, a lot of growth in the central area, is not going to get planted like it normally does.

00;02;09;10 – 00;02;35;12

It’s going to be at least maybe three weeks. Four weeks later, if that’s the case. And instead of seeing soybeans out of Brazil in January, they’re not going to be able to get them because they’re going to be harvesting a month late. So we’ll start seeing more sales out. The U.S. now, I don’t fully expect that we’re going to see a huge amount of sales like we did in the past year, except for 23, 24, because we’ve had such a bigger crop in Brazil who had a big crop in Argentina last year.

00;02;35;12 – 00;02;42;00

And, you know, I think there’s tensions clearly between the U.S. and China, which causes the Chinese government to be a bit leery, despite where you.

00;02;42;00 – 00;03;06;29

Ask the US pressure on the global market won’t go away anytime soon. As you expect, Brazil again may plant less soybeans this year than they have in several years, partly due to the drought and partly due to price. However, Brazil has the ear of China, the biggest soybean buyer in the world. So regarding demand, can the U.S. go out and find enough smaller buyers to add up to what China normally buys?

00;03;07;04 – 00;03;09;09

And if not, what do we do with our excess soybeans?

00;03;09;12 – 00;03;28;03

Well, that’s a challenge, of course. But, you know, USDA is expecting global demand for soybeans in the current marketing year, which began on September 1st, to grow by 16.5 million tons worldwide. And that doesn’t include really any growth in China. So that’s demand growth outside of China. So we fully expect that we’re going to get more of the markets there.

00;03;28;03 – 00;03;53;02

Our price is going to be very competitive. On soybean exports introduced today I think we’re about $20 a ton below Brazil prices right now. So I fully expect that’s going to show up in more sales to Europe, Southeast Asia, elsewhere. I think we can get a few things that are happening positive. Europe is getting much more focused on trying to reduce its imports of soybeans from rainforest that’s been cleared, areas like that, they want to get more sustainable.

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And they’re looking at the U.S. as the lowest risk market to buy from. So I think we may see a big jump in our markets exports there. I think we’ll see an increase in exports to a few other countries in the world, but we’re not going to have to export necessarily as many, because we’re going to crush another 5 or 6 7 million tons of soybeans domestically this year, most likely because of all the new crushing plants that have been built in the U.S..

00;04;14;17 – 00;04;27;26

And let’s talk about that real quick, John, what do you hear? What’s the latest as far as those soybean crushing plants getting up and running? And what is the potential going forward for not just meal, but also the use of oil, also a byproduct of those plants?

00;04;28;00 – 00;04;55;00

Well, what’s driving all this expansion and the necessary crush is the demand for vegetable oils, including soybean oil, to go into the renewable diesel industry, which is heavily located around New Orleans and Houston. And, I don’t know, West Coast. So they’re using more soybean oil. And so the crush plants are starting up, because the hope is that they will get enough additional income from the soybean oil to be able to offset a lower price, a meal, which is going to occur because you’re crushing more beans, using less, no more domestically.

00;04;55;01 – 00;05;11;07

So I think that we’re probably going to do another 200 to 300 million bushels of domestic crush this year, and that’s what we’re expecting because we’ve got two new plants on stream and others coming. If that’s the case, that meal, there’s a lot of meal, probably 5 or 6 million tons of meal, it potentially is going to be on the market.

00;05;11;07 – 00;05;26;09

That’s not going to be used domestically. Even if we increase consumption a couple million tons, we’re still going to have at least 3 or 4 million tons a meal, probably. That has to be moved in the market. The other way we’re moving is a salad and a low price, plain and simple. Hopefully that’ll be offset by higher price for soybean oil.

00;05;26;09 – 00;05;42;08

So I think that’s where we’re headed in the future to be exporting more meal, relatively less soybeans. And of course, a lot of this depends on what’s the policy of the federal government and the state governments requiring or incentivizing the use of renewable diesel about as well versus fossil fuels.

00;05;42;08 – 00;06;07;29

Well, buying our way into global markets as far as soybean meal goes, we have some work to do as of this week. Prices at the Gulf right now for us, we’re at $406 per metric ton. That’s $23 per metric ton higher than Brazil and $25 higher than Argentina. We’re not competitive at all with soybean oil at the port, so what kind of work can we do there to become more competitive?

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It seems like that’s going to be a heavy lift.

00;06;09;19 – 00;06;31;03

Well, number one, there’s always a discount for Argentine meal because it’s not very good meal. So they will pay a lot less for markets on Brazil meal. Yes, that’s a challenge. But I think we are going to see the U.S. price and the Brazilian price come together here as we start really ramping up. I mean, we just came out in August, which had 158 million bushel crush, which was very low.

00;06;31;03 – 00;06;46;17

So we’re going to have to crush more the next few weeks. And that’s going to push meal down these old plants with new plants. Both are going to have to find a home for that meal. So I think you’re going to start seeing you as being offered at the Gulf at a very competitive price and increasingly more off the West Coast as well.

00;06;46;17 – 00;06;54;20

And what about soybean oil? What’s the outlook there for U.S. exports and our use here and within the country, but also in the export market that there might.

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Be I think we’ll probably sell maybe no more than 250,000 tons of soybean oil in the global market, in the export market, because if we have this demand domestically, which the industry anticipates, then we’re not going to have that much load export. That’s less of a concern. The bigger concern is what’s the price for the soybean oil market if it’s held up?

00;07;15;00 – 00;07;35;19

We’ve been encumbering that a little bit because we’re seeing increased imports of what supposedly is used cooking oil from China and elsewhere, which is a lot of people think not use cooking oil, maybe some used cooking oil blended with palm oil, which if that’s the case, and I think you’re going to see some increased restrictions on that because EPA is investigating whether it’s in fact used cooking oil.

00;07;35;19 – 00;07;52;17

But we’ve got more challenges with canola oil in the market and maybe a lot more challenges if China moves ahead with the anti-dumping restrictions on Canadian canola, the more that canola is going to get crushed in Canada and the oil is going to flow into this market, we’ve got a lot of unknowns at this point. We got a lot of hopes.

00;07;52;17 – 00;08;13;12

But the unknowns are what’s challenging with, for example, in California they want to do renewable diesel. But California Air Resources Board wants to restrict the amount of virgin oil, soybean oil and canola oil that can go into those feedstock. You know, that’s a challenge to U.S. agriculture, because the facts are that California Air Resources Board doesn’t care about agriculture, and that’s not their issue.

00;08;13;13 – 00;08;20;21

Their issue, which is to maximize use of any oils, in fact, exempts soybean oil and canola oil to make biodiesel in real is.

00;08;20;23 – 00;08;39;13

Another thing surfaced recently, John, that I want you to hit on and that is Argentina bought soybeans from the U.S. now, this is how competitive U.S. soybeans are on the global market right now. The freight on board prices, the farm prices at the Gulf here in the US for this week at $410 per metric ton for November delivery.

00;08;39;13 – 00;08;55;10

Now, that compares to Brazil’s $427 per metric ton price and Argentina’s $413. So we’re under both Brazil and Argentina. Are we under enough where Argentina has to come and buy us soybeans? And that’s first time that’s happened for a number of years and has to be surprising.

00;08;55;16 – 00;09;24;18

Well, my first reaction when I saw that last week was, that ain’t right, something’s a mistake. And I’m waiting to list Thursday’s USDA export sales report to see if there’s a correction to that. But if it is correct, it’s clear that someone in the crusher in Argentina decided we’ve got a real drought down here. The part on river which supplies the plants in Rosario mainly, and particularly the Paraguay River, which flows into there and takes beans from Paraguay where they normally import them from, may not be able to take the beans down to the crushing plants.

00;09;24;18 – 00;09;44;11

So it would be a case of crushing Argentina and said, we don’t get new beans in Argentina until late March April, so we need to go ahead and bring in some soybeans, but I’m going to wait till the end of this week to decide whether or not that actually happened or somebody made a mistake, that I find it hard to believe that somebody would offer that as a mistake.

00;09;44;11 – 00;09;48;24

But who knows? I’ve seen this happen before. We did sell Argentine soybeans to them before.

00;09;49;01 – 00;09;59;01

Now. This is our final question here to you and our so what segment. So if you could share with us, what do you think producers and processors could take from this conversation we’ve just had?

00;09;59;07 – 00;10;17;03

Well, I’m not going to sugarcoat anything. We face a really tough year ahead because we’re about to harvest the biggest crop ever. Soybean prices are been down, and then the nine tens, and I think probably out of the farm sector, they’re probably in the nine today, which is at or below everyone’s cost of production except those that just own their land.

00;10;17;03 – 00;10;37;17

And we only hope with now is that demand does pick up in the world, which I think is likely because much lower prices generally result in bigger demand. So I think that’s possible. I think we’re hopeful that China does come in for a sizable chunk of soybeans, for the yuan, for shipment between now and the end of February period, and we see good demand elsewhere.

00;10;37;17 – 00;10;53;16

And we also see really crushing plants in the US operate. But it’s going to be tough because, you know, today, what are the big groups in New Zealand said they’re going to produce 166 million tons in the next crop year, which is going to be coming out in the market in late January or February. And that’s a challenge.

00;10;53;16 – 00;11;08;08

Now, that crop is far from made. It hasn’t even been planted yet. They’ve got these drought problems down there. That crop may not be that large. And if an El Nino shows up like some are predicting this fall, that’s a problem for Argentina because they always have problem with El Nino.

00;11;08;12 – 00;11;25;08

Well, John, thanks again for your comments. That’s all the time we have for today, but a very good insight and we appreciate your time anytime. Thank you again. John Bass, consultant for U.S. Soybean Export Council, and thank you for joining us today. If you’ve enjoyed listening to From The Furrow, be sure to tell a friend or to and subscribe to us wherever you listen to your podcast.

00;11;25;14 – 00;11;29;12

Thank you to the Ever AG Insights Crew for their work on today’s show.

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