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Trick-or-treat market

11/01/2013 @ 2:56pm

I realize it is 264 days until Halloween. However, after this week’s soybean market action, I feel as if I have been the victim of a nasty Halloween treatment by the soybean market ghouls. 

I have been watching the cash bids for the month of October. The close on October 1 confirmed a harvest low just as harvest was getting underway. Initially, prices responded exactly as I expected. Upward movement was not very exciting, but at least it was the right direction.

Unfortunately, prices pulled back close to where they started. Then the process repeated itself. The high on that move took prices to 45 over the October 1 low.  A third pullback took place on October 28, but stopped short of the earlier two lows. A big surprise came on October 30 when January futures rallied 5¾ cents, but the cash bid was 14 cents higher here in Cass County.

This narrowing of the basis was the result of switching the cash bid to January futures as well as a rally in the futures market. Both the improvement in basis and improvement in the futures price are normally signs of improving demand. In this case, commentators attributed some of the move to harvest weather delays. This seemed to be very positive news for someone with beans to sell.

Unfortunately, the bad treatment by the market ghosts and goblins was still ahead. Futures had a good overnight trade, Wednesday night, but all of the enthusiasm disappeared by midmorning. Thursday, all of the gains made the day before were erased by the time trading ended for the day. When the smoke settled, the cash bid was five cents below where it had settled the day before. It leaves me wondering why the basis had such big moves in both directions. The excuse I heard was that one of the big processors in the area increased its negative basis after the switch to January futures.

The sad part of this story is that those of us who were planning to sell soybeans on the bounce had only October 21 to 25 to make a sale at a price 35 cents above the harvest low. A normal dead-cat bounce results in at least 50 cents above the low. In high price years, the sales opportunities have been as much as a dollar above the low. Now, the big decision is whether to take the lower price offered. The alternative is to try to wait out this pullback in the hope that the better prices are still in the future. My inclination is to split my inventory and spread out sales. I like to use that strategy in a rising market. That may not be possible this time. 


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