Soybean Prices Rise As the 2022 Crop Year Approaches in the US

From 1970 through 2008, nearby CBOT soybean futures never traded in the teens. The highest prices were at $12.90 per bushel in 1973, $10.9950 in 1988, and $10.6375 in 2004. The first print above the $13 per bushel level came in January 2008. In 2012, the bean futures rose to an all-time high at $17.9475. 

From the September 2012 high, soybean futures made a series of lower highs and lower lows, reaching $7.8050 per bushel in May 2019. Since then, the price broke out to the upside. In 2021, the nearby soybean futures contract reached $16.7725. 

More than the weather is impacted soybeans over the past year. The US is the world’s leading producer and exporter of the oilseed. In the past, China typically purchased one-quarter of the annual US crop. As we head into the 2022 crop year, soybeans are back in bullish mode, with the price above the $15.50 per bushel level on February 3. The trend remains higher going into the peak season of uncertainty over the coming crop. The potential for a new record high is rising in the current environment. 

A multi-year high in 2021

Since the late 1960s, the high in CBOT soybean futures came in 2012 when the oilseed’s price reached $17.9475 per bushel. In 2008, the price reached a record $16.63 per bushel, which gave way in 2012. 

The chart illustrates the correction that took nearby soybean futures on a path of lower highs and lower lows from 2012 through May 2019, when the oilseed found a bottom at $7.8050 per bushel. As the worldwide pandemic sent many commodity prices to multi-year lower in early 2020, soybeans reached a higher low at $8.0825 in April 2020. The 2019 low came as a trade dispute between US and China caused the country that typically purchased one-quarter of the US annual crop to decrease its buying. 

Meanwhile, rising inflation pushing input prices higher, a return of Chinese demand lit a bullish fuse under the soybean futures market in 2021. The uncertainty surrounding the weather and the 2021 crop sent the price into the teens and to a high of $16.7725 per bushel in May, the highest price since 2012 and higher than the 2008 peak. 

The oilseed futures then corrected to a low of $11.7125 in November 2021. The price was back in the teens by the end of 2021. 

Beans are in the teens in early 2022

The continuous CBOT soybean futures contract closed 2021 at $13.2875 and continued to rally in January 2022. 

As the chart of soybeans for March 2022 delivery illustrates, the price rose from $13.3925 on December 31, 2021, to the most recent high at $15.6400 on February 2, a 16.8% rise in just over one month. 

In the coming weeks, US farmers will begin planting the 2022 soybean crop, and the price is already threatening to challenge last year’s high. In February 2021, the soybean futures prices reached a high of $14.4300 on their way to the $16.7725 May peak. On February 3, 2022, the price was substantially higher than the February 2021 peak.  

Inflation pushes production costs higher

In 2021, the US consumer price index rose by 7%, and producer prices increased by nearly 10%, the highest inflation levels in four decades. Labor shortages are pushing wages higher, and inflation has increased the cost of fertilizers, energy, farm equipment, and other critical input costs for farmers. Moreover, land values have exploded higher, making rents prohibitive for farmers who lease acreage. 

Rising input costs make profitable farming challenging, and crop prices need to rise to compensate for the higher production costs. 

US energy policy means more biodiesel production

In 2021, the Biden administration dramatically changed US energy policy to address climate change. Encouraging alternative and renewable fuels and inhibiting traditional fossil fuel energy sources via increased regulations and bans on drilling and fracking for oil and gas have increased the requirements for biofuel. 

The US is the leading producer and exporter of corn and soybeans. Corn is the primary ingredient in ethanol. Growing demand for biofuel has put upward pressure on corn’s price, which was trading near the $6.20 per bushel level on February 3, 2022. One bushel of soybeans can yield 1.5 gallons of biodiesel when it comes to biofuel. Processors crush soybeans into two products; soybean meal and soybean oil. The meal is a critical input in animal feed. The oil is used for cooking purposes worldwide and in the refining process to produce biodiesel. China is a massive consumer of soybean oil. Growing US demand for alternative energy products creates a bifurcation of the demand verticals, pushing prices higher. The rise in crude oil, natural gas, and coal prices puts additional upward pressure on soybean futures. 

The weather will determine the 2022 crop

The weather over the coming months will determine the size of the 2022 US soybean crop. Meanwhile, increasing demand from China, rising biofuel requirements, and exploding input prices put upward pressure on soybeans. As we head into February, the price is challenging the $15 per bushel level. If the bullish stars continue to line up for the soybean arena, the price could head for a challenge of the 2012 $17.9475 high this year. Moreover, if the weather does not cooperate, the next time beans are not in the teens could be above the $20 per bushel level.