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The market is incentivizing farmers to plant fewer soybeans, analyst says

Soybean prices have dropped 78¢ in January.

Grain markets have had a tough time the past few weeks, with soybeans dropping nearly 80¢ recently after supposedly bullish news of the Chinese-U.S. trade phase one deal. 

That has dragged corn and wheat prices lower, although they have not performed as badly as the soybean market.

For example, soybean prices since January 2 have dropped 73¢ on the March contract, to January 28, with corn down only 7¢ and CBOT wheat actually up 12¢ in that time frame. While soybean prices have tanked, wheat prices have actually run higher. 

That is providing incentive for farmers this winter to remove soybeans from the planting mix even more, substituting instead spring wheat and corn. 

But how long can this go on, as we already had 13 million less acres of soybeans planted in 2019 while corn acres actually rose 600,000 acres. If China wants to buy soybeans from the U.S., this is not the way to get U.S. farmers to grow it.  

Recently, the stock markets have acted more like soybeans lately, as if the world would soon end as stocks dropped 450 points in the Dow on concerns the coronavirus would have great impacts on the world.  However, most of the 4,500 infections worldwide and 106 deaths are in one province of China.

So, it seems like perhaps the end of the world might be a bit premature? After a horrific week last week and to start the week Monday, calmer heads seem to be prevailing, but the stock market did lose all its gains so far this year.  

Positive News

In positive news for agriculture, the WOTUS (Waters of the U.S.) rule was clarified by the administration in a more favorable light to agriculture. Quoting from the EPA news release last week:
“The Navigable Waters Protection Rule ends decades of uncertainty over where federal jurisdiction begins and ends. For the first time, EPA and the Army are recognizing the difference between federally protected wetlands and state protected wetlands. It adheres to the statutory limits of the agencies’ authority.”

In other ag news, U.S. federal antitrust investigators are concerned about a potential deal between bankrupt milk processor Dean Foods and Dairy Farmers of America, another major co-op. The justice department is concerned that there will be a loss of competition in some markets for selling raw milk. Who would have thought milk sales would be susceptible to monopolies? 

Pro Ag is in Watertown, South Dakota, at the Winter Show Feb. 11-15, and will be presenting seminars at the Fieldhouse on Friday and Saturday 10 - noon, including “2020 Vision Ag Outlook” in which we highlight six reasons why corn should hit $4.65 and soybeans $10.85, by August 1, this year.  

Ray can be reached at raygrabanski@progressiveag.com.  
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Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country. 

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