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Got Beans?

02/18/2011 @ 12:29pm

Got any old crop beans left to price? Many are wondering when is the best time to price any remaining old crop. What has history shown us?  Looking back at past years when bull markets have persisted will help us with our planning for today.

Below, we look at March and July soybean futures.

Looking at March soybean futures for the past 25 years, the March contract's high has rarely occurred during the final weeks before expiration. This year, however, we are on target to make new highs during the final weeks of the contract's life. Therefore, if you are in need of making cash sales over the next few weeks, be confident and feel good about your sale.

This is history in the making. Only six times out of the last 25 years has the March contract made its contract high during the last few weeks of its trade.

Year / Date and March High Futures Price / Price Pattern Leading Up To The High March Price

  • 1988 / Feb. 19th, 1988: $6.45 / Low was in mid August of 1987. Rallied through harvest. Sideways in a 30 cent range Dec – Mar.
     
  • 1996 / Jan. 4th, 1996: $7.70 / Low was in mid August of 1995. Rallied through harvest.  Peaked in January, then slid lower through March.

  • 1997 / Mar. 10th, 1997: $8.62 / Low was in early Nov. Breakaway gap higher in Jan.  Rallied until Mid-March.

  • 2004 / Mar. 2nd, 2004: $9.79 1/2 / Low was in early August 2003. Rallied through harvest and through winter. Firm in March.

  • 2007 / Feb. 22nd, 2007: $7.91 / Low was in early October 2006. Rallied through Nov. Sideways Dec and Jan. Breakout higher Jan to Feb. peak.

  • 2008 / Mar. 3rd, 2008: $15.70 / Low was in mid August 2007. Rallied through harvest. Peaked in early March, then set back lower.
The pricing pattern for 2011 March soybean futures is VERY similar to the years above, and therefore, based on history, if you're looking to unload cash beans within the next few weeks, you'll most likely capture the high of the March contract move. As of this writing, March futures are at $14.50.

Then, looking at price patterns for July soybean futures, and when the July contract has its highs, the pattern is similar. Eleven out of the last 25 years, the July contract had its contract high in the spring or early summer of the year that it was to expire.

Year / Date and July High / Price Pattern Leading Up To The High July Price

  • 1987 / June 15th, 1987: $6.04 / Low was in late Feb. of 1987. Rally into late April. 60 cent drop into May.  Rally into June.  Price drop after that.

  • 1988 / June 23rd, 1988: $10.99 1/2 / Low was in August 1987. Rallied through harvest. Breakaway gap higher in May. Accelerated $3.00 to June top in a month.

  • 1993 / July 19, 1993: $7.34 / Low was in Oct. 1992. Slow harvest rally, through winter into May. $1.50 rally mid June to Mid July.

  • 1996 / July 12th, 1996: $8.56 / Low was in August. Rally through harvest. BIG rally into April. 90 cent set back into June. 90 cent rally in early July.

  • 1997 / May 7th, 1997: $9.02 / Rally was in January 1997, through May, then $2.00 drop into July.

  • 2000 / May 3, 2000: $5.82 1/2 / Low was in December 1999. Rally then through May.  $1.20 drop into July after May peak.

  • 2002 / July 10th, 2002: $6.00 / Low was in early Jan. Rally into June, accelerated $1.00 rally June into July peak.

  • 2003 / May 20th, 2003: $6.58 / Low was in May 2002, steady climb into summer 2002, then firm harvest prices. Rally into winter and spring of 2003.

  • 2004 / April 5th, 2004: $10.64 / Low was in Aug 2003. Rally through harvest, into spring peak. Then $2.50 drop into June.

  • 2007 / July 13th, 2007: $9.15 / Low was in October 2006. Rally through harvest with rally into late Feb. Then $1.00 drop, rally resumed mid May into July.

  • 2008 / July 3rd, 2008: $16.60 / Low was in Aug 2007. Rally into Feb. 2008, then $4.00 price drop. Rally mid May until July 2008.

You'll notice that the pattern is this: A pretty darn good pricing opportunity window from April until July, and also a lot of volatility in between. It seemed that in most of those years, prices would rally into February of March, then have a setback, with a final rally again in May/June.

Keep these historical patterns in mind when doing your scenario plan for pricing opportunities for your operation. Watch the charts. Know that the USDA collects acreage information the first week of March for the March 31 Planting Intentions Report. After that, there's not much to talk about unless there is a planting delay or weather event to entice the market higher again in late spring/early summer.

Remember, I have always encouraged you to practice "market scenario planning," because analysis like the table above provides a good indication of what the market might do, but no guarantee. We always encourage our clients to prepare strategies for multiple scenarios, in case the best guess about price direction (yours or mine) is wrong.

ALERT--New crop pricing opportunity may be ahead!

Now, let's narrow our focus on the years that March and July had common rally patterns. Those years were 1988, 1996, 1997, 2004, 2007 and 2008. In those years, the markets all had similar fundamentals of very tight ending stocks and planting delays, and very similar technical formations. Notice how 2011 is shaping up to be quite similar.

Switching focus to new crop November bean futures in these particular years: 1988, 1996, 1997, 2004, 2007 and 2008. In five of those six years, the BEST TIME to price (i.e., the high November contract price) was March through early July. Ding ding ding ding! Your new crop pricing opportunity is most likely approaching soon!

If you have questions, you can reach Naomi at nblohm@stewart-peterson.com, or post a marketing question in the Women in Ag forum.

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2011 Stewart-Peterson Inc. All rights reserved.

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