Tuesday’s USDA report sparked a rally in the soybean market that held up, for the most part, in Wednesday’s market session. New crop soybeans backed off a little from Tuesday’s close, but these higher prices represent an opportunity for growers to profit on both their 2015 and 2016 crops. According to Purdue Ag Economist Dr. Chris Hurt, the numbers in the May USDA report projected the lowest world soybean surplus in almost a decade, “The USDA projection on world soybean carryout indicate we maybe the lowest number on soybeans since the 2008-09 marketing year.”
Hurt says, as a result, soybean prices will remain high and that will boost farmer profits, “Given prospects for high priced soybeans and low priced corn, the financial incentive to shift intended corn acres to soybeans has reached new highs.” Based on crop budgets projected by Purdue agricultural economists, soybean farmers stand to earn $116 more per acre than corn producers this year. “This is one of the highest incentives to shift from one crop to another we have ever seen,” Hurt said.
Going forward Hurt says the market will be very volatile and will be watching this summer’s weather very carefully, “So far this winter and early spring, the market has not put in a weather premium; that will now change.” Many long term weather models are forecasting a hot, dry August which could reduce soybean yields.
Hurt is strongly recommending growers take some action to lock in these higher prices for both the 2015 and 2016 crops, “This is the strongest incentive the market has provided producers to plant more soybeans. I would recommend growers look at marketing some old crop this spring and perhaps even selling up to a third of their 2016 crop.”
The March planting intentions report indicated that more corn acres would be planted, but Hurt says now the market is sending a different message, “Delayed planting this spring may actually turn out to be a financial blessing if farmers end up planting more soybean acres. Soybean prices have been rising rapidly this spring while corn prices have increased much more slowly.” Since March 1, soybean prices have risen 25 percent, or $2.20 per bushel, while corn prices are up only 4 percent, or about 14 cents per bushel. This shift will have a tendency to bring high soybean prices and low corn prices back into better alignment. Hurt stated, “Ultimately, farmers in states like Indiana, Michigan, and Ohio that have fallen behind on corn planting may benefit financially if they shift some of that acreage to soybeans.”