Trade wars, low river levels reducing soybean prices

Soybean farmers are being decimated by low commodity prices, a lack of a new farm bill, trade wars created by President Donald Trump’s tariffs, and surging input costs with no relief in sight.

Now, basis on the Mississippi River in Memphis is plummeting, partially fueled by lower river levels that have plagued the region for several years.

Basis is the difference between a local cash price for a commodity such as soybeans, and its futures contract price, said Hunter Biram, extension economist with the University of Arkansas System Division of Agriculture. For example, if the local cash price for soybeans was $10 per bushel on Sept. 1, and the October futures price was $9.70 per bushel, that would be a negative 30-cents basis.

A clear trend in recent years with the Mississippi River in Memphis has been as the river level drops, so does basis. But this year it seems to be accelerating.

“Right now, we’re not only seeing basis fall below where it normally would be, but also below the level that we start to see when these river levels get to that minus five-points,” Biram said.

The gauge in Memphis was at minus 0.27 feet on Tuesday (Sept. 2). The low point in Memphis is minus 8 feet. Dwindling river water levels have been propelled by a lack of rain upstream in the upper Mississippi Basin and the Ohio River. Many counties in the region have had their five driest years ever, according to rankings by the Iowa Environmental Mesonet.

The U.S. Coast Guard has issued low-water restrictions between Caruthersville, Mo., to around Angola, La., on the lower Mississippi. The restrictions include having drafts no deeper than 11 feet for northbound tow barges and no greater than 11.5 feet for southbound barges. There are additional restrictions for the number of barges that can be included in a tow. Fewer barges mean less soybeans, rice and corn headed to New Orleans.

EXPORT SALES
Multiple factors are driving the basis drop. One is a nearly 30% drop in exports this year when compared to last year.

“I think that grain elevator operators on the river are anticipating the river to fall to those low levels, which would then trigger those high barge freight rates,” Biram said. “I also think the fact that China hasn’t bought any new crop soybeans is also playing into this.”

In the U.S. Department of Agriculture’s (USDA) most recent “Export Sales” report on Aug. 21, “the U.S. still had no sales of soybeans to China,” said Scott Stiles, extension economics program associate for the Division of Agriculture. “A year ago, we had already sold them 2.9 million tons by this time.

“In total thus far, the U.S. has sold 7.2 million tons of soybeans to all destinations,” he said. “A year ago, we had already sold almost 10.2 million tons. The actual difference in sales between this year and last year is 2.93 million tons. Clearly, China is the missing 2.9 million tons.”

Chinese buyers have been instructed to not buy U.S. soybeans in retaliation for Trump’s tariffs and ongoing trade war with the country, Ag Web reported. Several other countries have been buying soybeans, however.

“The U.S. has sold soybeans to 28 known foreign markets,” Stiles said. “Mexico is the top buyer of the 2025 crop soybeans so far with 1.83 million tons. Rounding out the top five would be Pakistan, Taiwan, Egypt and Japan. Soybeans are mostly crushed for cooking oil and the meal is used for livestock feed. Increasing amounts of soybeans are being used for biodiesel.”

STORAGE SITUATION
Some farmers can weather the lowering basis by storing soybeans until prices become more favorable. Biram previously told Talk Business & Politics that storage capacity for many producers is running low. Does that create a backlog of beans that might, in turn, put more downward pressure on prices?

“Without a China trade deal and a firm agreement to buy some U.S. soybeans, we could see soybean ending stocks increase,” Stiles said. “Currently, 2025/26 stocks are estimated at a fairly tight 290 million bushels, down from 330 million last year on a large reduction in planted acres this year.”

In August, the USDA projected soybean exports at 1.7 billion bushels.

“Recognizing the trade uncertainty with China and lower U.S. soybean production, the 1.7 billion export projection is down 170 million bushels or 9% from 2024,” Stiles said. “Ideas on exports are certainly subject to change, and much depends on China and U.S. trade negotiations.”

Stiles said “industry sources seem to believe we may not see soybean purchases from China until a formal trade deal is hammered out, and that may not occur until November. By then, a few months of the key U.S. export window has passed.”

“The September to January timeframe is the best opportunity the U.S. has to ship soybeans to China before the Brazil harvest is available,” he said.

About 40% of the world’s soybeans are produced and exported from Brazil. The U.S. ranks second, producing 28% of the crop. Arkansas farmers annually grow about 3 million acres, making it one of the top 10 producers among all states. It’s the most widely grown row crop in the Natural State.

CORN, RICE MARKETS
Soybeans aren’t the only crop affected. The U.S. is projected to export about 2.88 billion bushels of corn from the 2025 crop, which is about 18% of total demand. Mexico is the primary buyer, and much of that corn is shipped south by rail, Stiles said.

“The U.S. is expected to see record corn production this year, and that is certainly pressuring prices,” he said. “Fortunately, corn export demand for the 2025 crop is off to a very solid start with sales to date double what they were at this time last year.”

Last year, of the corn exports loaded on a boat, 63% of the total was shipped to the gulf via the Mississippi River, while 35% went out of the Pacific Northwest.

The news is not quite so good for rice.

“Rice prices are hovering near five-year lows,” Stiles said. “I would expect growers to put the crop in the bin this fall and look for better market opportunities after harvest. This year’s Mid-South rice crop is going to trickle in longer than usual. Similar to soybeans, 2025 rice export sales are off to a very slow start. Presently, long-grain export sales are half of what they were at this time a year ago.”

Long-grain rice exports are expected to be about 149 million bushels or 33% of total demand.

“Generally, the larger portion of long-grain exports is rough rice, and practically all of that goes to Mexico, Honduras, Guatemala, Nicaragua, El Salvador,” Stiles said. “Some to Venezuela and Colombia occasionally. The long-grain milled rice goes to Haiti and Iraq, mostly.”