Reward the soybean market, analysts say
With Chicago Board of Trade (CBOT) November 2007 soybean futures reaching $8.80 and November 2008 futures at $9.00 this week, market analysts urge producers to reward the market.
Despite most market attention being put on explosive corn and wheat complexes, producers are reminded that the CBOT November soybean contract has rallied $0.60 itself in the last 30 days.
Soyoil replacing higher-priced palm oil for end-users, increasing demand for biodiesel, and dry weather in the eastern Corn Belt, are combining to push up soybean prices. Plus, with U.S. soybean yields threatened by weather concerns, China's soy output lowered and its demand raised for 2007, the soybean producer is being offered marketing opportunities, analysts say.
Darrel Good, University of Illinois economist, says producers have some marketing decisions to make on new crop soybeans.
"Prospects for extreme price volatility will make new crop corn and soybean pricing decisions very difficult, particularly for those in dry areas. Still, the high prices offer the potential for good returns in 2007-08," Good says in a weekly newsletter.
Moe Russell, Russell Consulting Group president, says that of all these fundamentals, the market is focusing most on the weather.
"There remain soybean areas that have are too wet to get planted and other areas that have been planted but are not getting sufficient rain." Russell says. "So, we may be seeing our weather market for the summer."
Anne Frick, Prudential Bache Commodities LLC, says soybean crop scare rallies usually occur between June 23-July 10. "But, when plantings are down, as they are this year, the crop scare rally occurs early," Frick says. "Fewer plantings leaves little room for low yields."
As of Wednesday, Russell estimated November 2007 soybean prices could reach $9.00 per bushel.
"I'm telling my farmer-customers to reward the market," Russell says. "As the market shows strength, keep selling into it. Don't sell all of your soybeans at one time, just 10%-20% at a time."
Noel Blue, a CBOT floor trader and broker, says the downside is limited for soybeans nearterm.
"Considering we have been lingering around 825, to even take a dip below 800 and then stabilize back up above the buck does not seem strange at these levels."
Frick sees soybean prices rallying to near $9.50, basis the November 2007 contract. "It will take continued dryness in the eastern Corn Belt. "With more normal weather, it will be difficult to maintain any rally after July," Frick says. Historically, soybean crop-scare rallies don't last past July.
Meanwhile, longterm, Russell says with this year looking so strong, it's hard to say where this soybean market is going.
"The simple answer is that it depends on demand, acres, and yield. But, if demand stays strong, there is a short soybean crop, and corn prices stay high, you could see real good soybean prices for 2008," Russell says.