Nathan Martin usually plants equal amounts of soybeans and corn on his 1,400 acres of cropland just outside Centralia. This spring, though, Martin plans to put two-thirds of his cropland in soybeans to take advantage of some of the best prices in years.
Soybeans, the No. 1 cash crop in Missouri, were selling in central Missouri on Friday for a lofty $8.66 to $8.69 per bushel — a price the market has not seen since September 1997.
“These prices will cause more interest in soybeans, causing more farmers to change their crop rotation,” Martin said. “More beans, less corn.”
Abner Womack, co-director of the Food and Agricultural Policy Research Institute at MU, predicts that soybean prices will drop significantly in the coming months. But Martin has reason to remain optimistic. He has received a forwarded price of $6.50
per bushel for his beans next fall by Archers Daniel Midland Co. in Mexico, Mo. A forwarded price is a guaranteed date of delivery from the farmer and a promised price from the buyer.
“Considering the history of the market, $6.50 is good and above estimated prices,” Martin said.
Prices wil drop through spring
Womack expects farmers to plant more soybeans this spring, which will help push prices down by harvest time. “Acreage in the spring will be higher and we are expecting a normal crop, leading us to an estimated price of $5.65 a bushel,” he said.
Martin cautions other farmers about forwarding their crops. “It can turn into a real negative thing if the yield is low or the crops don’t produce enough to fulfill the contract,” he said. If this were to happen, Martin said, he would have to buy enough soybeans to fulfill his contract. “This does happen. Fortunately, I have never experienced it,” he said.
To limit his risk, Martin takes precautions. “I only forward 50 percent of my crop to be safe,” he said.
Several factors are behind the recent rise in soybean prices. Martin, who planted 700 acres of soybeans this past season, said it has everything to do with supply and demand.
The U.S. soybean crop last fall was below expectations because of drought conditions across the country, including parts of Missouri.
“Everything that was negative for soybean farmers, like weather, turned positive in the end,” Womack said.
Another factor was an unexpected increase in demand in China. For the 2002 growing season, China purchased 80 million bushels of soybeans compared with the 180 million bushels the country has purchased from the 2003 crop. The agricultural policy institute estimated that 900 million bushels of soybeans would be sold to other countries in 2004; Womack said 89 percent of that estimate has already been exported or contracted — and there are still beans left to sell.
Low-carb diets may be a factor
Dale Ludwig, executive director of the Missouri Soybean Association, believes livestock — and the demand for protein being driven by the low-carb diet craze — also has played a role. Eating more meat, he said, means a higher demand for soybean meal from livestock producers. Soybean meal is a protein supplement fed to livestock in animal feeding operations.
Ludwig does not expect prices to remain at $8. “Prices at the moment depend on South America,” he said.
The soybean crop in Argentina and Brazil is one and a half times larger than the U.S. crop. South American farmers will start harvesting in early March as they enter their fall season. If they have a good crop, it could lead China to buy South American beans, causing U.S. prices to fall. Livestock feeders could also start importing bean meal from South America.
But unlike U.S. crops, South American soybeans can suffer from rust. Rust is a fungus that affects South American soybeans, reducing crop yield.
Womack said farmers who have soybeans in storage that haven’t been sold are in a good position, but notes that predicting future price fluctuations is difficult. “We can’t let this get away from us,” he said. “When soybeans start dropping to $7.70 a bushel, it would be a great time to move some beans.”
Ludwig, who farms 200 acres of beans, already has sold his crop. “I won’t tell farmers what to do, but if I had more beans I would be selling them,” he said. Historically, prices have stayed above $7 per bushel for extended periods of time, but rarely remain above $8.
Martin said the high prices aren’t as glamorous as people make it out to be.
“This is not a get-rich quick method,” he said. “In fact, considering the poor yield and cost per acre, we did about average. Granted, prices were high, but my yields were in the mid-20s (of bushels per acre) when it should be in the upper 30s, and cost per acre did not change.”