Soybean market susceptible to price breaks
Soybeans have been under pressure this week, with the bean market holding up much better than corn or wheat the past few weeks. But this week, that might just mean soybeans are behind the wheat and corn market as far as the price break.
The pressure might be coming from the sheer size of the 2009 crop, with Pro Ag yield models indicating USDA might be 1-2 bu/acre below the actual crop size at their 42.3 bu/acre current guess. Corn might also be a larger crop than USDA's current 161.9 bu/acre estimate, as Pro Ag yield models are closer to 166 bu/acre (a new record yield!).
Frost scares have been few and far between, with each threat met with some price premium floating into the market. Last week's reaction was a 30-cent price rise in just one day for corn (50 cents for soybeans), but this week's reaction to a frost threat was a 10-cent price rise in both corn and soybeans.
Note the much more muted reaction to a cold weather forecast in a day's weather runs! We are slowly taking more and more crop out of harms way with each week that ticks by, and soybeans are just about free from any frost risk now. Even in North Dakota, where crops lag the most from normal maturity, soybeans are dropping leaves en masse. It won't be long (another week?) until soybean crops are safe from any significant damage due to frost.
Corn might still be a week or two away from that level, and that might be why the corn still has a more animated response to a frost forecast. But even corn is soon going to be more limited in the amount of damage it can do nationally. Corn is now 80% dented, and will soon have only more limited damage that can be done to many states. Only North Dakota is so far behind normal now that it might not make maturity, whereas another week or two of frost free weather will allow many other states to be free from significant frost damage in corn.
North Dakota might not escape some losses even if frost occurs on October 15 -- it's just too late for that crop to ever make full maturity. A better question for North Dakota is whether the latest crop will be harvested at all (in winter or spring, let alone fall) as there is still a real question whether it will make corn to harvest. North Dakota is now 49% dented, though, so at least that amount of corn is harvestable (and another week might push that to 75% dented). We are adding corn bushels every week now that we remain frost free as we are now past the normal frost date for much of North Dakota.
So as we march into harvest of the corn and soybean crop, market bulls are getting more and more bad news. Soon the crop will reach a level where frost can do only limited damage, and harvest is right around the corner.
Even soybeans will soon have their pipeline filled with new crop soybeans, and cash prices will start to sag down to new crop price levels (remember the pipeline was about empty to start this new crop year). Due to the empty pipeline, soybean prices have help up better than corn or wheat thus far, but that could soon end as we approach harvest of what might be a record large crop.