MT. JULIET, Tenn. (DTN) -- The DTN National Soybean Index, a measure of cash soybean prices, spiked to $15.13 cents as of Thursday night, the highest level since July 2013. The index hit its all-time high of $17.48 during the drought of 2012.
The national average soybean basis, which is 21 cents below the May futures contract, is also the strongest it's been in eight years.
In the futures market, the July contract gained more than $0.93 this week to close at $15.16 on Friday. The November contract, which more closely correlated to new-crop supply and demand factors, closed at $13.41 1/2.
"The story is how much these bids have spread to the west," DTN Lead Analyst Todd Hultman said. "We're talking about $6 corn bids, and for beans, we're talking about cash bids over $15. And there are lots of quotes in South Dakota and Nebraska today at $15-plus."
DTN began gathering cash grain bids in the 1980s. Today, it collects cash corn prices from nearly 3,300 locations and cash soybean prices from more than 2,900 locations every business day. It compiles that data into the DTN National Corn Index and National Soybean Index as well as a variety of maps, including Market Tracker, to help give subscribers a clear picture of the cash grain markets. DTN also gathers grain bid data for spring wheat, hard red winter wheat, soft red winter wheat, soft white winter wheat and durum.
Hultman said he's been watching the Market Tracker feature closely this week, which gives him an interactive view of cash prices across the country, similar to the illustration for this story.
"It's a great tool for getting a sense of what's happening throughout the entire country, as well as in our own backyard," Hultman said. If you don't currently have access to this tool, you can sign up for a 14-day trial of MyDTN here: https://www.mydtn.com/… or you can contact the producer sales line at 888-350-0972.
Hultman said China's demand is driving this unusual old-crop, planting-time rally for soybeans, just like it is for corn. For more on the corn market's dynamics, please read "Market Approaches $6 Corn" here: https://www.dtnpf.com/….
CHINA DEMAND PUSHED PRICES
It all started last summer, when Brazilian soybean prices continued to post new highs after a big harvest. Then, China began purchasing U.S. soybeans in late July and kept up an active pace through September.
"That was the first bullish clue," Hultman said. "And then, of course, at the same time, we got that late spell of dry weather after the derecho, so both corn and soybean yields came down. The supply situation has tightened ever since then."
USDA's April World Agricultural Supply and Demand report pegged soybean ending stocks for the 2020-21 marketing year at 120 million bushels, including an export estimate of 2.28 billion bushels. With current export commitments at 2.23 bb, "We'll probably have to keep pushing that higher because there's four months left" in the marketing year, Hultman said.
The export sales pace has dropped significantly in recent weeks, which Hultman said corresponds to China transitioning business to Brazil, which just finished harvesting a record soybean crop.
STRONG DEMAND FOR BRAZIL SOYBEANS
"But, as I take a look at Brazil's soybean prices for the month of May, they've been making new highs lately, which tells me that demand for Brazil soybeans is incredibly strong," Hultman said. Soybean prices on China's Dalian exchange have also been reaching news highs in recent days, surpassing $18.24 per bushel when translating into U.S. currency. High prices and large crops don't usually go hand-in-hand.
"It's just hard to see where the limit is on their demand," Hultman said. "Everything is just upside down this year."
Typically, April is a quiet month in the markets with weather risk beginning to enter into the picture in May. Hultman said April is usually a good month to buy options because volatility, one of the factors in how options are priced, is low. "The put options are cheap this year not because volatility is low, but because they're so far out of the money."
The U.S. new-crop soybean situation is also very much up in the air this year. USDA's Prospective Plantings report said farmers intended to plant just 87.6 million acres to soybeans, which isn't enough to meet demand.
"I still think we'll end up with something closer to 90 million acres when all is said and done," Hultman said. "But, boy, if it's less than 90, we are just contributing to very scarce situation of soybeans."
At this point in the growing season, most analysts use a trendline yield forecast because there are so many variables, like weather, that can affect yields. Hultman said there's no wiggle room for adverse weather events this year, and yet, long-range weather forecasts call for more warmer and drier weather, particularly in the Western Corn Belt.
Hultman said despite the very tight situation in soybeans, he doesn't think the market is doing what it needs to in order to steal more acres away from corn.
"I don't think the $13 new-crop price really reflects how tight things actually are. I think prices need to be closer to $15 to really get the kind of attention the situation deserves," Hultman said.
It's hard to compare today's prices to prior prices, he added.
"It's a new world situation, the likes of which we've never seen. We've never had this strong of a demand customer before, with this big of an appetite, that has the potential to clean out both our supplies and Brazil's supplies in one year."
Katie Dehlinger can be reached at firstname.lastname@example.org
Follow her on Twitter at @KatieD_DTN
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