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Bullish soybean history

10/21/2011 @ 12:56pm

According to a study we conducted, soybean prices have a tendency to move higher over the next 30 to 60 days. This could reflect in post-harvest recovery and/or improved demand as end users more aggressively buy. Farmer selling is generally light after harvest once the crop goes into storage.

Our research indicates, when viewing a specific date, how often prices have moved upward, from a historical perspective, over the previous ten years. As an example, on October 20, if you asked how often March soybean futures finish higher 30 and 60 days out, you would find the numbers respectively are eight and nine. Stated differently, eight out of ten years the market is higher 30 days from October 20, and nine out of ten years higher 60 days from October 20. Our research also indicates a data pattern through the end of October that suggests two to three months after, October prices are higher the majority of time.

Fundamental reasons for higher soybean prices suggest a post-harvest recovery period and a growing window of uncertainty for the South American crop. Typically, the Southern Hemisphere experiences its most heightened weather concerns near mid-December through February. This coincides with the same window of time our study indicates that prices are usually trending up. Last year, after harvest, China was a strong buyer. A good economic scenario, strong need, and potential adverse weather developments in South America were factors affecting China's aggressive buying in fall of 2010. 

Therefore, you might conclude that prices could be higher this winter, especially after a harsh price decline in September. With carryout dropping on the October USDA report, the U.S. dollar losing ground the past two weeks, and deferred livestock markets pushing into new highs, a bullish argument is easier to make. Add on the idea that post-harvest farmer selling will be light, and the stage is set for a price recovery.

Lastly, an argument for a price recovery could focus on the ratio between new crop bean and corn prices. Currently, the ratio of new crop November soybeans to new crop December corn is at 2.05. Many years it's typical to see this ratio closer to 2.3 or 2.4. This could imply that new crop beans are undervalued versus 2012 corn. It's likely that traders will buy beans after harvest winds down. History suggests so! 

If you have questions or comments, please contact Bryan Doherty at 1-800-TOP-FARM ext. 129.

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Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

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