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Corn, soybean prices remain low despite early blizzard

In spite of likely frost damage, soybean prices remain low in the face of falling demand.

Profit From Soybean Cultivation
BitsAndSplits |

Global ‘glut of corn and soybeans’ persists despite second round of extreme weather

A once-in-a-century early snowfall may have buried crops in the Northern U.S. Plains, but corn and soybean prices are expected to remain low in spite of acres of frost damage.

The early season blizzard — the earliest since 2005 — dropped 20 inches of snow in Minnesota and North and South Dakota, and the freezing temperatures that followed extended into northwestern Iowa and Nebraska.  Financial analytics firm Refinitiv estimates the storm affected some 8-10 million acres of corn and more than 12 million acres of soybeans. Portions of these crops had yet to reach full maturity.

But while the full extent of losses has yet to be counted by the U.S. Department of Agriculture (USDA), the storm’s impact on corn and soybean prices was minimal, according to Daniel Redo, Refinitiv’s director of agriculture research.

“The storm … did have an effect on prices, but it wasn’t significant,” he said. Corn and especially soybean prices remain relatively low despite recent weather events due to global supply and demand, he said.

Although this year’s crop yields will “pale in comparison to recent years,” Redo said global supply of corn and soybeans hasn’t taken a significant hit. The U.S. alone is still on track to produce its sixth or seventh largest corn and soybean crops on record, and other nations have also increased production.

Meanwhile, Redo said, demand for soybeans has fallen as African swine fever continues to ravage Asia, and many U.S. producers still have excess grain in storage due to the extended trade conflict with China.

“The world is still sitting on a glut of corn and soybeans,” Redo said.

Effects on organic grain production

Organic grains expect to see greater impacts as a result of this month’s storms, according to Ryan Koory, a senior economist with organic sector analytics firm Mercaris. Organic production is more heavily concentrated in the northern U.S., with some 20% of organic field crop productions located in states affected by the blizzard.

“Oddly enough, though, we have not seen all of these production issues show up in price yet,” Koory said. Corn and soybean storage likely played a role in that, he said, as did market uncertainty. “No one is in a hurry to jump in until they understand just what the 2019-20 harvest is going to look like.”

Koory said he anticipates prices for organic commodities will rise once the full impact of the storms is realized, but price increases may not take place until well after the harvest is in, and perhaps as late as January.

Refinitiv, however, doesn’t expect to see significant price swings or major cuts to overall corn yields. The losses in northwestern states, Redo said, can be made up elsewhere. And even if soybean yields fall, Redo said prices will be determined by whether the U.S. and China can resolve their trade war and negotiate the initial phase of a deal next month.

Though there have been some positive developments on that front, Redo said, China continues to purchase “relatively cheaper, higher-protein Brazilian soybeans … so until Brazil weather starts to matter for their crop, the soybean market will continue to take its cue from the trade war.”

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