ANKENY, Iowa – For many producers, profit opportunities on this year’s bean crop are below the cost of production, but the Iowa Soybean Association says the remedy for low prices is low prices. The last WASDE report painted a bearish picture of the record potential in this year’s soybean crop, and that means lower farm prices for soybeans.
“I think most producers are looking at the next one to two years as being definitely a challenge,” says Iowa Soybean Association Market Development Director Grant Kimberley. However, he also points out that “as we get these prices down here at these lower levels, I think we’re certainly stimulating more demand. I think there’s room for USDA to increase the demand numbers on the upcoming reports down the road. It may take some time, though; none of these things ever happen quickly, so it does take time to rebuild livestock herds, and to rebuild the demand structure.”
An ISA delegation returned last month from China, where a dairy cattle herd 14 million head strong will prove to be yet another destination for China’s seemingly endless appetite for U.S. beans. Kimberley says, on the supply side of things, global production still has yet to respond to the possibility of a monster crop.
“The big question,” Kimberley says, “is once you get these prices down at these lower levels, especially if they’re much lower than where they are, you may not see a big change in overall production for this first year. But in places like South America, and even here in the U.S., where growers are not going to be able to have very good profit opportunities, they may start cutting production, especially in places like South America. So if you keep prices depressed for too long, then you’ll have a supply response eventually, but it does take some time, and in the short term here, I think we’re going to look at demand as being what we’re going to be relying on.”
To hear more about the bearish outlook on this year’s soybean crop, click the audio player above.
