By Tom Collins
The U.S. trade war with China may be getting all the media headlines, but there are more significant factors in the decline of soybean prices that farmers should be cognizant of, says Parrish and Heimbecker merchant Steve Kell.
As the U.S. and China engage in a trade war, soybean prices in May briefly dropped to less than US $8 a bushel — a 10-year low — at the Chicago Board of Trade. The prices hovered around US $10 a bushel last May, and then dropped to $8.19 as the trade war began. The prices rebounded over the winter to US $8.80-$9.20, but dropped to US $8 a bushel in May as the trade dispute escalated. The 10-year high was US $17.58 in 2012.
However, those low prices are impacted more by a basic supply-and-demand issue: Too much supply and not enough demand. The lower demand is thanks, in large part, to African Swine Fever. It has been reported that 4 per cent of Vietnam’s domestic herd has been lost to the disease, and one report says up to 150-200 million pigs in China will be affected, equalling a 30 per cent loss in pork production. According to Rabobank, a food and agribusiness research firm, China’s herd-rebuilding will take years.
The fever — which has no treatment or vaccine — has also been found in Hong Kong and South Africa. Soybeans are used in hog feed, and as Kell put it, “Dead animals don’t eat anything.” Chinese imports of Canadian soybeans are way down this year: Barely over 3,000 tonnes from January to March of 2019, compared to 72,806 tonnes over the same period last year.
In the meantime, a huge supply of soybeans is oversaturating the market. The last four soybean harvests (the fall of 2017 and 2018 in North America, and the spring of 2018 and 2019 in South America) have been the biggest four soybean harvests of all time, said Kell.
In Ontario, there were 875,000 metric tonnes of soybeans stored on Ontario farms as of March 31, up from 650,000 metric tonnes a year earlier. Kell added that farmers don’t necessarily need to change their marketing strategy, but they do need to be realistic about their expectations for soybean prices.
With the cold, wet spring throughout Ontario and the U.S. delaying planting, more farmers could be forced to switch from corn to soybeans. Kell recommends farmers hold off on switching as long as possible. He also said farmers are considering looking at planting other crops, such as white beans or oats, but farmers need to market those crops before they plant it.
“Ontario growers just want to be as least reliant on oilseeds as they can for the next year or two,” he said. “Just try and not be making the mortgage payments on oilseeds until this sorts itself out.”
Larry Hutchinson of TCO Agromart at Trenton said some acres could be switched to soybeans, but added farmers will leave those soybean acres unplanted if the planting season gets too late, which is what happened in 2017. That year, 54,470 Ontario acres were left unplanted, more than triple the five-year average from 2012-16, according to Agricorp.
Hutchinson said East-Central farmers will push their corn planting dates to June 1, and after that, are dependent on weather.
“If you hit June 1, and they’re calling for three days of rain, you’re going to put the corn planter in the shed and say ‘That’s it, I’m done,’ ” he said. “If they’re calling for a nice week of sunny weather, you might say, ‘You know what? I’m going to put a few more acres in.’ ”