Soybean Demand Stays Strong in 2023: How Many Acres Will Follow?

The soybean market remains in a better fundamental situation than the other markets. Domestic demand remains robust, and though export shipments have lagged so far this year due to low water levels, export commitments are in line with USDA export projections, and the shipments should catch up once water levels normalize.

The bigger question right now for soybeans is 2023 plantings. High fertilizer and seed costs might tip the scales toward soybeans in new crop plantings, though the high liquidity levels of most farmers will somewhat offset those cost pressures. New crop cotton prices are weak when compared to corn and soybeans, and so soybeans are also likely to attract more acres in the South.

As always, the biggest determinants of soybean prices are supply (from South America) and demand (from China) and at the moment, both appear to be ready to pressure North American supplies. While we remain quite some distance from completed planting in Brazil and Argentina, to date, planting has been more than adequate for record production. Now the question will simply be whether Mother Nature supplies enough precipitation to bring the crops to bear.

As to China, the zero-COVID policy continues to be a drag on growth. Analysts are currently projecting growth for 2022 at 3.0% to 3.5%, below the Government’s target of 5.5%. With fears of a recession rising, it also casts doubt on growth in Chinese domestic demand. I’m not yet worried about cuts in domestic food demand in China beyond what the zero-COVID policies have already caused. I think it will continue to hinder growth, but I also believe that this is already priced into the market.

Given the choice of storing corn or soybeans, I lean toward corn in 2022-23, as the market has more carries in it and the opportunity cost per bushel is much lower.