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Soybeans were happy to see the one month delay in tariffs for Mexico. The market will take a light hope that means that maybe Canada and also China will be safe as well. China is our focus here. We have light concern with US exports. Even before this tariff weekend three of the past four weeks had seen weak interest. In the big picture, there is a clear reason for this recent change in pricing since December. The prior bearish-only soybean narrative has moderately changed. We are now allowing soybean futures up to $10.50. That includes an 80 cent trade risk discount. That was filled and we consider soybeans “at value”. We may consider soybeans a value if $10.00 futures is tested.
Tariffs: Over the weekend President Trump announced 25% import tariffs on products from Mexico and Canada and 10% for products from China. Today both Trump and the Mexican president announced a one month stay on their tariffs. Trump had a conversation with the Canadian president at 2 pm Central today. We do not have word on any outcome of that conversation. The White House spokesperson noted he plans to speak with the Chinese president in the next two days. For soybeans the story is mixed. Our focus was on the China tariff here. On a positive note it is not a big tariff. Negatively, this comes at a time when we had light export concerns anyway. Brazil still holds a price advantage.
AgLeaders Conference: The January edition of the AgLeaders Conference series wrapped up last week. For 2025 we see US soybean acreage at 83.5 million. That would be -3.6 from last year. Given a return to trend yields, last year was -2.5% from trend, production will run only -19 million from last year at 4.348 billion. Our 363 million bushel ending stock view for new crop is near USDA's current 380 old crop view. This balance sheet has a lot of sway in it given unknown trade policy. Do not get dead set on these numbers as permanent. For price our new crop November soybean futures forecast suggests a balanced sideways view on price. Now it is time to plan out the year ahead with your Allendale marketing specialist.
Acreage Declines?: Everyone in the nation seems dead set on the obvious for acreage this year, more corn and less soybeans. Allendale agrees with both of those ends. Heck, our view on soybean acreage is -3.6. But will it happen? It is true that historically corn acreage does swing either way each year. But soybeans, over the past 30 years, have not seen this type of swing specifically on the March report. Except for two anomalies, 2007 -8.4 and 2019 -4.5, soybean acres don't fall much. All other years with acreage declines beyond those two special years were limited to -1.6. With the trade get more soybean acres than expected on the March 31 Prospective Planting?
Brazil Production: No one, private or public, is posting any hits yet to Brazil's soybean production. That narrative continues with today's updated views from Celeres and StoneX. They are at 174.0 and 170.89 million tonnes respectively. USDA estimates last year's crop at 153.0.
Brazil Harvest: AgRural estimates the soybean harvest at 9% complete. That is under last year's 16%. Brazil has a long January - June harvest. Most areas are in yield determination right now.
Argentine Concerns: Agro-climatologist, Eduardo Sierra who advises the Buenos Aires grains exchange, said harvests of soy and corn would likely end up well below current forecasts - depending on when rains arrived. "If it started to rain now, you could have 45 million tons of each crop. Every week in February that goes by without rain, you lose 5 million tons more," he said, estimating that both soy and corn would end up closer to 40 million tons. USDA is currently at 52. One Argentine exchange is at 49.6. The other exchange is officially at 53.0 - 53.5 but notes they will lower it. In our view this is a background supportive story, not one yet that US soybeans can rally on alone.
Basis: Soybean basis at harvest lows was -0.54. It rallied up to -0.20 in January. Current levels as of Friday the 31st for our model location have widened back out to -0.35. Basis continues to follow other heavy supply years.
Export Sales Struggle: Soybean export sales were -32% from average in the latest week on Thursday's report. To meet USDA's goal remaining sales can run quite low, -30% from the five year average. The problem is that three of the past four weeks have missed that needed goal. New for the soybean export discussion, sales are no longer strong. There is also a minor risk from any potential cancellations. At this time, we'll still hold USDA's export estimate on the balance sheet.
Micro Grain Futures: CME Group announced a plan to start a new series grain futures contracts. Starting on February 24 they will start contracts 1/10th the size of regular ones. This will include corn, soybeans, soymeal, soyoil and wheat.
Argentina Cuts Export Taxes: Two weeks ago the Argentine government announced a reduction in export taxes. This will be temporary and lasts through June. For soybeans, the rate falls from 33% to 26%. For soy products it drops from 31% to 24.5%. Argentina is a minimal exporter of whole soybeans. They are the largest exporter of soybean meal and also oil. USDA estimates their meal exports at 28 million tonnes this year. They would have a 37% share of world activity.
USDA's Production View: A large surprise was also seen on 1/10. The fall 2024 production estimate was lowered by a sharp -95 million bushels. That was the largest decline ever on a January report. This production change was made with planted acreage -50,000 and harvested -221,000. Yields were lowered from 51.7 bpa to 50.7. This new yield is -3% from USDA’s view of starting trend, 52.0.
USDA's Low US Stocks: On 1/10 USDA dropped production but made no offsetting changes to crush or exports. That was positive. Ending stocks were lowered from 470 million last month to now 380. Ending stocks have posted a good decline from the peak of the year, 560 million back in August.
Soybean Pricing: We still have little confidence over the soybean balance sheet. If USDA's 380 stock estimate were left by itself, futures pricing would be $11.30. For soybeans, we feel comfortable with a trade risk discount of around 80 cents. That would imply the market may allow trade to $10.50.
Brazilian rains over the past four weeks were -35% from normal. Actual rains have been below the forecast. Of light note, they are still getting 1 inch per week so let's not raise large concern. Reproduction, when weather really matters for yield determination, is here in January and February. The current forecast is strong at 2.0 - 5.9 inches over two weeks. The average rain over two weeks ahead is 4.0.
Argentina saw rains last week -38% from normal. The prior four weeks were also dry at -37% from normal. Last week's Argentine rain was 0.7. Their corn crop is in active yield determination. There is light concern. The forecast for the corn area for two weeks ahead is 3.0 - 5.5 inches. The norm is 2.2 over two weeks.
Pricing: USDA currently estimates 380 million bushels for ending stocks. Allendale's pricing models suggest 400 million ending stocks implies 1110 futures, 450 implies 1080, 500 implies 1040, 550 implies 1005 and 600 implies 975. We expect pricing to remain under value for several weeks until trade policy is clarified.
Chart: March soybeans are in an uptrend. Last week's trade filled one downside gap on the chart as well as one upside. The only remaining one is the 1/23 close of 1065 ½. Next resistance is the September high, 1100 1/4. ...Rich Nelson