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Soybean Price: It’s All About Yield!

People ask me often, “So, what are those soybean prices going to do?” My simple answer is that Mother Nature has more to say about it than I do! Currently, the outlook for soybean prices around the industry is more of a gloomy forecast than it is sunny. Rightfully so considering the U.S. is expected to plant 6 million more acres of soybeans compared with last year. With current U.S. ending stocks for soybeans sitting at 445 million bushels, we’re at the most comfortable level of supply cushion in a decade.

Yet, even with that supply cushion, upcoming yield for this growing season can still trump any negative outlook. Last year, soybean yield was absolutely phenomenal across the country; the average nationwide yield was 52.1 bushels per acre. In the 2014 and 2015 growing seasons, soybean yield was closer to 48 bushels. From 2009 through 2013, yield was consistently between 42 and 44 bushels per acre. 

In the chart below, you’ll see a scenario comparison for this upcoming soybean growing season in the U.S. The scenario includes the expectation that 6 million more acres of soybeans will be planted (with harvested acres represented at 99.1% of planted acres – which is pretty normal year in and year out, according to USDA report precedent). Next you’ll notice three different columns of yield comparisons. At the bottom of each yield comparison, you’ll notice how ending stocks change. And, you can scenario plan how those different yields and ending stocks could greatly influence price (assuming demand stays constant *no trade wars* using data from the April 2017 USDA report).

Remember, if the perception is that ending stocks are getting larger, then prices usually fall lower. If the perception is ending stocks are getting smaller, then oftentimes, prices will rally.

If the yield is perceived to be trendline or higher, the market will truly most likely react with lower prices.  How low?  Nine dollars is the first target for November 2017 futures, with $8.00 as the bigger target lower.  However, if we are below trendline yields, we could easily see November 2017 futures retest the $10.00 price area, with $11.00 (the winter highs) as the next target above there. It’s all up to Mother Nature. Make sure you’re ready for any weather and yield scenario she brings!

If you have questions, you can reach Naomi at nblohm@stewart-peterson.com.

 

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 2017 Stewart-Peterson Inc. All rights reserved.

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