Soybeans are having an incredible year. That’s bad for prices.

Simone Del Rosario: Everything seemingly went right for growing soybeans this year. Which is why it’s all going wrong now. 

Soybean futures are near 4-year lows, down about 45% from its 2022 peak. Corn is also in a similar boat.

We’re in the midst of an American farm slump right now, despite very high yields for the country’s two biggest crops. 

Earlier this year, the U.S. Department of Ag projected net farm income would drop 26% in 2024, affecting not only the farmer but the businesses that rely on the farmer’s income, like John Deere and Kinze. Deere expects its North America sales to continue to slump. This summer, the company has laid off hundreds of salaried employees. 

I want to bring in Damian Mason, host of the business of agriculture podcast, Damian, why do we have such high soybean yields this year? What’s going on specifically?

Damian Mason: Well, first off, farmers in America are very, very good at doing what they do, which is produce commodities. We’re remarkable at it on a trend line Now, granted, there’s been some down years. We’re on a trend line. Every year, our soybean production goes up about a bushel per acre, okay, eight tenths to one bushel per acre. And if you put that over time, it’s kind of like the old thing. Remember that, that little mathematical thing they did when you’re young, if I gave you a penny today, but I doubled every day for the next month, would you take that deal or $20 every day and you say, oh, $20 every day, not realizing there’s like a there’s like a that same thing about exponential growth is just remarkable. So we’re going to put out about 53 bushels per acre. Say, when I was in high school, we were at half that. Okay, so 53 bushels per acre put on 86 million acres, means a whole heck of a lot of soybeans. We’re going to be around 4.6 billion bushels of soybeans produced in the United States of America this year. Favorable weather patterns, technological advances. The machinery is so good. You mentioned John Deere, the ability for us to get the right seeding population, to get it at the right soil, planted depth, to use the right fertility at the right time. It’s just amazing compared to where we were just a long time ago. And as an agricultural person, farm boy, I always point out, remember, environmentally, we’re doing this with less, less units of natural resources per bushel produced than we ever have. So we’re just really good at making bushels. The problem, of course, is we don’t need all these bushels. I mean, it’s just a it’s just a situation where we’re probably in an oversupply situation. And that’s what happens with commodity production. The cure for low prices is low prices. The cure for high prices, high prices. You’re kind of seeing that this year.

Simone Del Rosario: Yeah, and exports are go they’re going higher. So it’s not that we’re not exporting as much. It’s just simply, as you said, these yields are pretty incredible. And the fact that we have these really favorable weather conditions that we’ve seen this year. How are farmers adjusting to this reality?

Damian Mason: Well, some are going to, unfortunately, put their head in the sand and say, Oh, well, you know what? This will all be fine. It’s just a blip. Some people like me out here at the Agricultural Economics angle, have pointed out, I just pulled something. I printed this off almost a year and a half ago. This is a stat from the United States Department of Agriculture, and it’s from at the end of year 2022 the end of year 2022 China was our number one agricultural customer in 2022 with $36 billion of agricultural products bought from the United States. They’re going to be about half that this year. So what we’ve got now is a very ascending productive capacity in soybeans, 86 million bushels, I’m sorry, acres planted and harvested, whereas just a, you know, 3040, years ago, we might have been in like 60 or 70 million. So we’ve got a bunch more acres growing a bunch more bushels per acre. And we did that. We were conditioned to that in agriculture, to supply the new China. You know, tiger, this whole, this whole thing about China over the last 20 years. Well, the problem is, China’s plenty supplied. Brazil ramped up production. Argentina ramped up production. Other Asian countries ramped up production, as well as as us. So we’re in this situation. What are farmers doing to adapt? Well, they could switch acres to something else, but with 86 million acres planted, it tells me they didn’t switch off of many acres. They could also figure out new ways to sell their product, and that’s where the biodiesel. Going to come into effect, although that’s more government driven than farmer driven. 

Simone Del Rosario: You were on a farm recently where they had said, Forget about the soybeans. We’re going to be grazing cattle on this land. And said, can you tell me about that? I saw that on your Twitter, and I knew I wanted to talk to you about soybeans, because I was just super intrigued by what was happening there on the ground.

Damian Mason: So think about this. Simone soybeans, essentially, were not really much of a crop until post World War Two in the United States. They were grown in Asia, you know, 1000 years ago. But they didn’t really come into mass acreage, broad acre production here in the United States until really the 1950s so we’re going to have 86 million acres. That’s almost 1/4 of our total cropland acres in the United States. Just to put that in perspective, corn is about 90 million is about 90 million, soybeans are about 90 million. They those two commodities occupy about one half of all cropland, food producing acres, not counting rangeland and grassland. So the intriguing part of that episode, of that that video that you saw my friend Kelly Garrett in Iowa, large scale farmer also has cattle as well as a cropland and he ran the numbers with his consultant, financial advisor on the farm, and he said, we’ve retooled what we think our cost of production is on these soybeans, and at $9 soybeans, which is where we’re hovering right now, a little over $9 per bushel, we think we can make More money by putting a mix of cover crops and forage crops on these fields and putting cattle on them. And if you keep up right now, beef prices are still pretty high. The consumer’s still paying for steaks and cheeseburgers and so there’s a little bit of a shortage of cattle. So he says, What if I took some of my acres out of soybean production and plant it to an array of forage crops, and then turn the cattle in there, intensively grazing it. I mean, you’re not talking about one cow breaker. You’re talking about a bunch of cows per acre and moving them, maybe, maybe two times a day, moving them and really maximizing that. And it looks like that’s going to work. Most people Simone wouldn’t think that you could do that in Iowa. They would say, oh, soybeans in Iowa all day long Trump cattle. But you know, it looks like the cattle are going to make more money per acre on some of his fields than soybeans. Well, that’s

Simone Del Rosario: Certainly economic innovation on the farmers part to to make that type of dramatic transformation there. But to your point, a lot of other farmers are holding out hope. Do you think that this this four year low in prices. Do you think there will be a turnaround? Obviously, low prices cure low prices. We’re going to see fewer acres of soybeans planted in the following crops Correct?

Damian Mason: Most of the hope is hinged on this. I pulled up a couple of things in some agricultural media. This one right here is a big one. United States Department of Agriculture announces 99 point 6 million, almost $100 million for biofuels and clean energy projects. You’ve heard about ethanol. Ethanol is in its 20th year, now generally derived from corn. We invented the Renewable Fuel Standard under the George Bush administration 20 years ago. There are approximately 190 ethanol plants that use corn as their feed stuff to make as their supply to make ethanol. Ethanol then goes into your gas tank about 10% 11% of everything that you burn in your tank, on average, is ethanol derived from corn. Well, we’re kind of looking at doing that with soy. For soy, diesel, biodiesel. We’ve had biodiesel products before. The new angle is to use the oil. If you crush a soybean, 80% of it ends up as soybean meal, which is best used to feed to a pig or a cow to make a pork chop or a steak. The 20% becomes oil. That oil would be required then to go straight into a refining process to make diesel. So there’s a lot of hope for a cleaner diesel, a less emission, a less pollutive diesel derived from using soybean oil, of course, then you’re going to have a little bit of a glut of soybean meal, that which makes a very cheap feed, which also might help bring down the cattle prices, because that would go then to the beef. So I think that’s the biggest hope right there, the idea that farmers are going to produce less. No farmer that you will ever meet says, You know what I want to do next year? I want to decrease my yields by 10% by doing a crappy job. Most of them are saying I want to go ahead and get more bushels per acre, and I want to be more efficient. I want to be a star producer. Yeah.

Simone Del Rosario: But as these prices are so low right now, 45% down, like I said, from 2022, highs. And it’s not just the soybeans. Corn prices are low too. Wheat prices are low as well. We I talked about it a little bit off the top, but how does this kind of ripple out through the whole farm country? You were in Iowa, Iowa is struggling.

Damian Mason: Yeah, yeah. And so this is an election year. So there’s going to be, there’s that angle, there’s the political as well as the economic angle of it. But your answer, I guess, the question you really want to know is, what can a farmer do to adjust? You can switch off acres. What has historically happened? And trust you, some of us are old. Must remember the 80s. You know you’re you go to town and get a job, and you really. Have to buckle down on some of your finances. Are we there yet? Well, we’re not. We’re not covering 18% borrowed money interest rates, so we’re not quite there yet. Simone, what we would do, we will switch to makers, is more specialty crops. There is a new chance at some increased revenue through sustainability programs, companies like one of my sponsors, true Terra, that will pay you if you can do cover crops and reduce tillage. So maybe you break even on your soybeans, but you pick up $25 an acre of the sustainability program, and that becomes your margin, which is poultry, I admit, but a break even or positive margin certainly keeps you in business longer than losing money per acre. But no, it’s a tough situation right now, and it’s it’s a story that we’ve heard a lot in in agriculture and in economics as it pertains to American agriculture, we were amazing at our productive capacity, and then we always have to look for somewhere to go with our bushels.

Simone Del Rosario: Damian Mason, host of the business of agriculture podcast, thank you so much for your time. 

Damian Mason: Thanks for having me on, Simone.