Milling & Baking News - October 23, 2018 - 20

Business

Soybean storage issues come
to fore amid China cutback

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20 / October 23, 2018
Milling & Baking News

silo, sausage or harvest bags, which allow
producers to store grain outside while
shielding it from precipitation. The bags
commonly are used in South America
and less frequently in the United States,
although more have been seen in recent
years. If bags are used for soybeans, the
crop will be harvested "extra dry," he
said, to cut down on damage while in
storage. Far more likely is that near the
end of harvest, hardier corn supplies will
be shifted to sausage bags to maximize
permanent housing for soybeans, which
are more fragile and store better in a climate-controlled environment where they
can be stirred.
Meanwhile, some will benefit from $3.6
billion the U.S.D.A. is authorized to distribute to soybean growers struggling in
the wake of the tariff-lessened soybean

©JUNIOR GOBIRA- STOCK.ADOBE.COM

KANSAS CITY - As fields in the U.S.
Corn Belt dry out from plentiful earlyOctober rains, producers are redoubling
efforts to harvest a record soybean crop
before the onslaught of wintry weather.
China, normally the largest importer
of U.S. soybeans, remains largely on the
sidelines due to a protracted tariff war
with the United States, meaning a vast
quantity of U.S. supplies will carry over
from the 2018-19 marketing year, leaving
the United States literally full of beans.
Industry experts said storage costs for
that hefty backlog of soybeans will be at
a premium and the commodity will fight
for available storage space with large
corn and wheat crops also in the mix.
"It's going to put a lot of pressure on
the grain storage system in those states
where you have the most grain," said Stephen Nicholson, a food and agribusiness
analyst and vice-president of Rabobank
AgriFinance. "Capacity utilization will be
higher again this year because you have a
huge bean carryout, you still have a pretty decent-sized corn carryout, too, only
two- or three-hundred million bus lower
than what we had a year ago, so it is going to strain the storage system for sure."
Storage capacity issues likely won't
come to a head until the weather-delayed
harvest advances further. The soybean
harvest in the 18 major states was 38%
completed by Oct. 14, down from 47% in
2017 and 53% as the recent five-year average for the date, according to the U.S.
Department of Agriculture.
"One thing that's probably helped a
little bit with the storage situation is that
the harvest has been delayed in a number of states because of wet weather," an
industry source said. "If we would have
had more normal harvest weather, drier
weather, there would be a lot more beans
coming in without the outlets we've had
for it in the past couple years."
The decimation of the Chinese export
program for soybeans that normally
would load mostly in the Pacific Northwest has left that region without bids or
offers for more than 60 days, as no other
countries are loading cargoes there. That
shifted the primary route for soybeans to
rivers and transportation lanes funneling
south toward the Gulf of Mexico. Storage
space limitations will be most prominent
in the Dakotas and other grain acreage
areas further from those Gulf routes that
lack a significant crush presence.
Producers in those areas may turn in
larger numbers to temporary storage solutions, such as grain bags, also known as

export program as part of a $12 billion
package that also will benefit other agricultural sectors. The payments are based
entirely on production totals rather than
unsold supplies or other factors. For now,
farmers will receive $1.65 per bu on the
first 50% of their production. Around
Dec. 1, the U.S.D.A. will recalculate its
trade models and determine if that $1.65
is still an appropriate payment.
"When they first ran it, we didn't have
NAFTA solved," Mr. Nicholson said.
"Now NAFTA's done. There's a gentleman's agreement if you want to look at
it that way with Europe, so you've got a
lot of trade issues off the table that won't
be part of the model now. The potential
is there for that number to go down.
Maybe it's a little less now because we're
still shipping soybeans to China, we're
still shipping soybeans someplace in the
world, so the next 50% payment will be
based on that new number they run."
China's sharp reduction in soybean imports would have wide-ranging implications to the U.S. market in almost any environment. But the U.S.-China tariff war
is being waged in a year likely to see a
record soybean crop. MBN
bakingbusiness.com / world-grain.com

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Milling & Baking News - October 23, 2018

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