Tag Archives: soybeans

While the U.S. and China have reached a deal for China to buy U.S. agricultural goods, the market is waiting for China to drop tariffs before transactions take place.

Reuters reports no substantial purchases can happen with a 25 percent duty still in place on U.S. soybeans, corn, sorghum and wheat, according to buyers and analysts. China over the weekend agreed to a trade war ceasefire, and the White House said China had promised to buy an unspecified but “very substantial” amount of agricultural, energy, industrial and other products, with purchases of farm goods to start “immediately.”

Though, Agriculture Secretary Sonny Perdue says the purchases will likely start next month. China’s foreign ministry said on Monday that the two presidents had instructed their economic teams to work towards removing all tariffs. Until then, Brazil is nearing harvest season of its soybean crop and, being cheaper, could instead supply China’s soybean needs.

In the last couple of months, there has been news about a new futures contract for soybeans. The Financial Times and Reuters, among others, reported that the CME Group, the world’s largest futures exchange, is considering launching a futures contract based on Brazilian soybeans. The discussion seems to have started after trade issues between the United States and China resulted in a 25 percentage-point tariff on U.S. soybeans exported to China. As Chinese buyers try to avoid the tariff by purchasing grain from other suppliers, notably Brazil, a new price dynamics between U.S. and Brazilian soybeans could be emerging. This raises the question of whether there would still be enough price correlation between the two countries for Brazilian producers and merchandisers to use the Chicago futures contract to hedge their soybean transactions. If the soybean price in Brazil is really becoming less correlated with the soybean price in the U.S., the local basis in Brazil will be less predictable and hence the hedging with Chicago futures contracts will become relatively less effective.

A similar idea came out in the early 2000s, which resulted in the Chicago Board of Trade (which is now part of the CME Group) eventually launching its South American soybean futures contract in May 2005. The new futures contract had delivery points in Brazil and hence was expected to reduce basis risk for Brazilian hedgers compared to the traditional soybean futures contract at the Chicago Board of Trade. However, the contract never attracted many producers and merchandisers with commercial interests in Brazil, and neither had it attracted many speculators. Since this contract never gained much trading activity, it was terminated after a while.

One of the main issues with the South American soybean futures contract created in 2005 was the same that afflicted other new futures contracts in history, which is the inertia of liquidity. The success of futures markets in commodities, equities, currencies and other asset classes relies, among other things, on the fact that it concentrates in the same place a large number of buyers and sellers willing to do business. This is actually one of the main reasons why futures markets were created a long time ago, i.e. to offer buyers and sellers a centralized marketplace where it would be easier and faster to find someone to trade with at a price that was satisfactory for both sides of the trade.

However, when new futures contracts are created, traders are often cautious in the beginning, and they do not trade as heavily as they would in more established futures contracts. They still want to learn how the new contract works, who is trading there, how the prices for the new contract behave, how much they can trade without moving the market, and so on. But if nobody really starts trading more heavily until others do, trading activity will never pick up. This is what commonly happens with new futures contracts, and also one of the main reasons why many of them are eventually terminated.

Is it common to have more than one actively traded futures market for agricultural commodities?

In the world of agricultural commodities, there is typically one futures contract for each commodity. It is unusual to find more than one futures contract on the same commodity (except for commodities with different varieties, such as wheat and coffee), mostly because of the liquidity issue that we discussed above. Still, in 2012, the Intercontinental Exchange (ICE) tried to create more competition in the market by launching futures contracts on corn, wheat, soybeans, soybean meal and soybean oil, which had already been trading in the CME Group for several decades. All of the ICE new contracts resembled the futures contracts traded at the CME Group and were actually based on the CME Group’s own prices. The ICE tried to gain some market share in the futures trading for grains and oilseeds by offering essentially the same futures contracts as the CME Group, but with extended trading hours and lower margin requirements. Again, traders chose to wait and see what others would do before they started trading and it turns out that these contracts never attracted much trading activity and were eventually terminated last summer.

An old adage in futures markets says, “Liquidity begets liquidity”. Markets with high trading activity will often attract more traders, while markets with low trading activity will rarely attract more traders. For any new futures contract, the main challenge is how to attract enough traders to create sufficient activity that will encourage other traders to join the market. For example, if a new soybean futures contract is created, traders (both hedgers and speculators) will essentially be asking the questions: “Can the new contract give me something that the existing contract cannot?” and “Will I benefit from the new contract even if it may not be as highly traded as the existing contract?” (Some interesting readings about this topic can be found in [1, 2, 3]).

New developments in different commodity markets may create more interest in new futures contracts over time. For example, a recent article about the wheat market discusses how the decline of U.S. share in production and exports and the emergence of former Soviet Union countries (specifically Russia, Ukraine and Kazakhstan) as large exporters may be changing the price dynamics in the world market [4]. The growing importance of wheat production in Europe would make local supply and demand relatively more relevant to determine wheat prices in Europe. Hence, European producers and merchandisers would naturally seek a futures contract based in Europe, which should better reflect their supply and demand conditions and should allow them to manage their local basis more effectively. The article argues that this is one of the main reasons behind the increase in trading activity for the futures contract on milling wheat offered by the Euronext exchange in Paris in recent years. The U.S. futures markets for wheat are still the central stage for wheat pricing in the world market, but the Europe-futures market for milling wheat has also become an important pricing platform.

Another example could be the futures contracts for agricultural commodities in China, such as the ones traded at the Dalian Commodity Exchange (DCE). The growing participation of China in the world market for commodities (such as corn and soybeans) resembles the case of wheat discussed above, although in much larger magnitude. However, there are restrictions for foreign traders who want to trade in futures markets in China, which limits the ability of these futures markets to become active pricing platforms for commodities in the world market.

Back to the idea of a South American soybean futures contract: Do we need another futures contract for soybeans?

The general notion that recent trade disputes have affected the price dynamics in the soybean world market and hence “destabilized” the relationship between U.S. and Brazilian prices would, in principle, justify looking into a new futures contract to hedge Brazilian soybeans. However, it is not yet clear what lies ahead. If trade disputes are resolved and we return to the “traditional” price dynamics between U.S. and Brazilian prices, there may be no need for a new futures contract. If trade disputes persist, a new futures contract may be useful depending on how the new price dynamics develop.

Looking ahead: May there be room for a new futures contract for corn?

The discussion about the potential for a new South American soybean futures contract brings to mind the changes that have been taking place in the corn market. In the last 10-15 years, Brazil has emerged as a major producer and exporter, as has Ukraine more recently. The growing participation of Brazil and Ukraine and a relatively smaller share of the United States in the world market raises the question of whether U.S. markets are still the central stage for corn pricing in the world. Although the answer is still likely to be yes, this could be changing in coming years. Recent articles that looked into the price dynamics in the corn market suggest that Brazil and Ukraine are already becoming more influential in corn pricing in the world market [5, 6, 7, 8]. If this movement continues in the future, in a few years we may be reading about ideas to launch new futures contracts for corn based in South America and/or Europe (or about increasing trading activity in the corn futures contracts already offered by B3 in Brazil and Euronext in France).

Kansas State University researchers are evaluating the impact of non-target injury from dicamba herbicide on non-resistant soybeans: The hope is to help producers lessen or avoid the unintended damage that was seen in some of the state’s fields the past two years.

Their work comes on the heels of the U.S. Environmental Protection Agency recently renewing its registration of Xtendimax, FeXapan, and Engenia, the three dicamba herbicides that are approved to be sprayed on tolerant (Xtend) varieties of soybeans and cotton. Non-tolerant soybeans are extremely susceptible to dicamba, causing injury to plant leaves and reduced yields.

“The critical factor is when and how we use the dicamba,” said Dallas Peterson, a weed management specialist with K-State Research and Extension. “An early-season application poses much less risk of causing a problem, and if we do see a little bit of non-target injury from those early-season applications, the long-term impact will be much less.”

Peterson conducted the work with colleague Vipan Kumar, a scientist at the Agricultural Research Center in Hays, and graduate student Tyler Meyeres. Among their findings, they were able to confirm that injury to soybeans was at its lowest level when dicamba was applied during the vegetative growth phase.

“Just because you see injury doesn’t necessarily mean that you’re going to see yield loss,” Peterson said. “However, that still doesn’t make it right; we still don’t want to have to worry about non-target injury.”

He added that researchers strongly suggest that producers closely follow label directions when applying dicamba, and “be aware of surrounding susceptible crops and plants to minimize the potential for off-target movement.”

“In fact, producers shouldn’t even spray the products if the wind is blowing in the direction of neighboring fields or areas with susceptible crops and plants,” he said.

Peterson noted that injury to soybeans and resulting yield loss was much higher when soybeans were exposed to dicamba during the reproductive phases, which was an expected finding. That was also the case when fields were exposed to dicamba applications multiple times during a growing season.

“When there were multiple exposures of soybeans to dicamba, crop injury and yield loss increased dramatically,” Peterson said.

For example, in a research setting, when the K-State group exposed soybeans to 1/100 of a typical field-use rate at all three growth stages, soybean yield was reduced by nearly 70 percent.

The researchers also evaluated dicamba rates of 1/500 and 1/1,000 the normal field use rate.  Peterson said soybean yield loss from those rates was much less than at the 1/100 rate and often not significant.

“Unfortunately, injury symptoms on soybeans can occur at rates down to 1/20,000 and it’s impossible to know what the exposure rate was,” he said.

“Dicamba has been beneficial from a weed control standpoint,” Peterson said. “But we don’t want to rely just on dicamba or we’ll have the same problems with resistance to dicamba that we experienced with glyphosate. So good stewardship and using an integrated weed management program is extremely important.”

He adds that producers should “communicate with your neighbors, follow the application guidelines and make good judgments when you apply and how you apply dicamba products.”

More information on EPA’s Oct. 31 decision to renew dicamba for use on growing plants is available online.

The nation’s row-crop harvest and winter wheat planting progress slowed last week, USDA’s National Ag Statistics Service said in its weekly Crop Progress report on Tuesday. The report is normally released on Mondays but was delayed this week due to Veterans Day.

Listen to Clay Patton with the report here: https://post.futurimedia.com/krvnam/playlist/crop-progress-report-1113-5473.html

As of Sunday, Nov. 11, 88% of the nation’s soybeans were harvested, up just 5 percentage points from the previous week. That was 5 percentage points behind the five-year average of 93%.

States with a significant amount of the soybean crop still in the field included Missouri with 30% of its soybeans still unharvested, Kansas with 26% of its crop unharvested and Arkansas with 22% of its soybeans still in the field, noted DTN Analyst Todd Hultman.

Corn harvest ended the week at 84% complete, up 8 percentage points from the previous week. Harvest lagged last year by 3 percentage points and was 3 percentage points behind the five-year average of 87%. Seventeen percent of the crop was still unharvested in Iowa, and 23% of Nebraska’s corn was still in the field, Hultman noted.

Winter wheat progress also remained behind normal last week. Eighty-nine percent of the crop was planted as of Sunday, behind last year’s 94% and also behind the five-year average of 94%. Winter wheat emerged, at 77%, was behind both last year’s pace of 83% and the average pace of 83%.

“Winter wheat planting reached 90% in Kansas, but is only 65% in Arkansas and 72% in Missouri,” Hultman said.

NASS estimated 54% of the nation’s winter wheat was in good-to-excellent condition, up 3 percentage points from 51% the previous week.

Seventy-three percent of the sorghum crop was harvested as of Sunday, behind 81% last year and 11 percentage points behind the five-year average of 84%.

Ninety-six percent of cotton had bolls opening as of Sunday, behind the average of 98%. Fifty-four percent of cotton was harvested, behind last year’s 63% and also behind the average pace of 61%. NASS has stopped reporting the condition of the cotton crop this season.

To view weekly crop progress reports issued by National Ag Statistics Service offices in individual states, visit http://www.nass.usda.gov/…. Look for the U.S. map in the “Find Data and Reports by” section and choose the state you wish to view in the drop-down menu. Then look for that state’s “Crop Progress & Condition” report.

National Crop Progress Summary
This Last Last 5-Year
Week Week Year Avg.
Corn Harvested 84 76 81 87
Soybeans Harvested 88 83 93 93
Winter Wheat Planted 89 84 94 94
Winter Wheat Emerged 77 70 83 83
Cotton Bolls Opening 96 94 98 98
Cotton Harvested 54 49 63 61
Sorghum Harvested 73 64 81 84


National Crop Condition Summary
(VP=Very Poor; P=Poor; F=Fair; G=Good; E=Excellent)
This Week Last Week Last Year
Winter Wheat 3 9 34 45 9 3 9 37 42 9 3 8 35 46 8

China dropped imports of U.S. soybeans by 80 percent in September and increased Brazilian imports by 28 percent. Reuters reports this is the first time that China has provided data on the country of origin for its commodity imports since the month of March.

China, which typically buys many of its soybeans during the fourth quarter from the U.S., is sourcing soybeans from Brazil as a direct result of the trade war with the United States. Chinese buyers imported 7.59 million metric tons of Brazilian soybeans in September, up from 5.94 million metric tons a year ago.

Soybean imports from the U.S. were 132,200 metric tons, compared with 937,000 in September last year. China implemented a 25 percent tariff on U.S. soybeans in July as part of the tit-for-tat tariffs between the two countries. Corn and sorghum shipments from the U.S. were reported significantly lower, as well.

The trade war between China and the U.S. will not be ending soon. President Donald Trump recently told Agri-Pulse that “you’ve got to have a little time,” referring to when trade relations may return to normal or better status between the United States and China.

President Trump is scheduled to meet with Chinese President Xi Jinping at the G20 meeting in Argentina, but those talks are not likely to propel any major shift toward reaching an agreement on the future of trade between the two nations. The trade war started with Trump’s steel and aluminum tariffs, quickly escalating to include tariffs on U.S. farm products, most notably soybeans and pork.

Further, a recent survey reported by Reuters shows that 85 percent of U.S. businesses surveyed say they have suffered from the trade war’s tariffs, and nearly half of the companies reported increases in non-tariff barriers, as well.

The nation’s soybean harvest picked up speed last week, while the percentage of corn harvested ended the week equal to the five-year average, USDA’s National Ag Statistics Service said in its weekly Crop Progress report on Monday.

As of Sunday, Oct. 28, 72% of the nation’s soybeans were harvested, up 19 percentage points from the previous week but still 9 percentage points behind the five-year average of 81%. That was an improvement from the previous week when harvest lagged the average pace by 16 points.

“Judging by the slower pace of harvest, several states appear to have troubled areas, including Iowa, Kansas, Arkansas, Minnesota, Missouri, Nebraska, Wisconsin and the Dakotas,” said DTN Analyst Todd Hultman. “Soybean crop quality remains a concern in late 2018.”

Corn harvest ended the week at 63% complete, up 14 percentage points from the previous week but equal to the five-year average of 63%. That compares to the previous week when harvest was 2 percentage points ahead of normal.

“Illinois, Indiana, Wisconsin, Missouri and Ohio are above their five-year average paces,” Hultman said. “Iowa, Nebraska and the Dakotas are below their five-year paces with Iowa corn 49% harvested.”

NASS is no longer reporting condition ratings for corn and soybeans for the 2018 growing season.

Meanwhile, winter wheat planting was 78% complete as of Sunday, behind 83% last year at the same time and also behind the five-year average of 85%. Winter wheat emerged, at 63%, was equal to last year’s pace but behind the average pace of 67%.

“Kansas, Oklahoma and Texas remain below their usual planting paces at 76%, 78% and 67% planted, respectively,” Hultman said. “Nebraska, Colorado and South Dakota are all in the mid-90s, nearly finished.”

NASS reported winter wheat condition for the 2019 crop for the first time on Monday, estimating 53% of wheat nationwide in good-to-excellent condition. That’s 1 percentage point above last year’s rating at the same time of 52% good to excellent.

Fifty-three percent of the sorghum crop was harvested as of Sunday, behind 57% last year and 13 percentage points behind the five-year average of 66%.

Ninety-six percent of rice was harvested as of Sunday, behind last year’s 99% and also behind the five-year average of 98%.

Ninety-one percent of cotton had bolls opening as of Sunday, behind the average of 94%. Forty-four percent of cotton was harvested, near last year’s 45% and also near of the average pace of 43%.

Cotton condition improved slightly from 34% good to excellent the previous week to 35% last week.

To view weekly crop progress reports issued by National Ag Statistics Service offices in individual states, visit http://www.nass.usda.gov/…. Look for the U.S. map in the “Find Data and Reports by” section and choose the state you wish to view in the drop-down menu. Then look for that state’s “Crop Progress & Condition” report.

National Crop Progress Summary
This Last Last 5-Year
Week Week Year Avg.
Corn Harvested 63 49 52 63
Soybeans Harvested 72 53 81 81
Winter Wheat Planted 78 72 83 85
Winter Wheat Emerged 63 53 63 67
Cotton Bolls Opening 91 88 92 94
Cotton Harvested 44 39 45 43
Sorghum Mature 94 89 95 95
Sorghum Harvested 53 46 57 66
Rice Harvested 96 90 99 98


National Crop Condition Summary
(VP=Very Poor; P=Poor; F=Fair; G=Good; E=Excellent)
This Week Last Week Last Year
Cotton 18 16 31 27 8 13 20 33 26 8 5 10 30 41 14
Winter Wheat 3 11 33 45 8 NA NA NA NA NA 4 8 36 43 9