There’s a big soybean crop coming this fall, so what does that mean for prices? Stephen Nicholson, global sector strategist for grains and oilseeds at Rabobank, says the soybean market has struggled recently.
“The soybean market has been held up for quite a while by biofuels, and particularly renewable diesel and the potential for SAF, and I think those are all still market things we need to keep in mind that I think we’ll still be there, but maybe the hype has come off that a little bit. That’s kind of tempered it. There’s a lot of this market discussion about how cheap RINs are, but I’ve done a little work noodling around that, and if you look at RIM values, they started diving over a year ago, and we haven’t seen the renewable diesel production or demand has dropped off at all. At the worst, you would argue it’s flat, so it hasn’t dropped off. I could say the demand is still there as we go forward. The imports of renewable diesel continue to grow as well because we need that production, or we need that supply for the demand here in the U.S. So, I think that is a bit of a bright spot for soybeans, but at the same time, some of the bloom has come off the rose a little bit.”
Turning to wheat, it appears some of the world’s biggest wheat exporters are low on stocks.
“The next question is well, how come the wheat market hasn’t responded? So, let’s kind of talk about the global market for wheat. It’s not that much different from when you look at total grain production around the world. The U.S. had a great crop this year across almost every geography. Argentina had a good crop this year. Australia had a good crop as well. But I should also say Canada has a good wheat crop coming out there, so that’s always good. You think about that as you wonder why is the wheat market in such a funk. Yes, Europe, Ukraine, and Russia had produced about 20 million metric tons less of wheat in the world, and so you think that should be a very favorable wheat market, and I would agree with that. And fundamentally, if you look at whether it’s total wheat stocks in the world or if you look at the exporters, their wheat stocks have been on multiyear decline. So fundamentally, I would agree with the premise of your question is in the wheat market, you should see pretty good support to wheat prices.”
The corn market may be behind the lower wheat prices.
“However, the problem goes back to our first conversation about corn, and it’s all about that substitution of wheat versus corn for feed, and with cheap corn, that’s going to put a lot of downward pressure on wheat prices and that’s what we’re seeing here right now. And, granted, we don’t feed as much wheat in the United States as they did in other parts of the world, but you have to remember, corn is that substitution factor. If corn is cheap, wheat is going to be pressured as well.”