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Soybeans, the dark horse?

Agriculture.com Staff 09/29/2006 @ 11:33am

With unbridled enthusiasm over ethanol demand and usage, the logical expectation for next year is that corn acreage could increase, mainly from soybeans. With high wheat prices this past summer and the wheat market in a rally mode this fall, it is likely that wheat acres will increase.

Therefore, acreage needs to come from somewhere. The likely switch is from either cotton or soybeans.

If the switch comes from soybeans and acreage is reduced one to three million, this in itself acts as a potential force to help support and rally soybean prices. A decline of two million acres at 40 bushels per acre could equal a direct cut in carryout by 80 million bushels. That still leaves an adequate carryout somewhere over 400 million for the upcoming year.

Bear in mind, however, that the soybean market trades on two crops. The combination of Argentina and Brazil produces more soybeans than does the US. Uncertainties in this part of the world or a poor crop could leave the soybean market as the major bull force in the year ahead. We encourage producers to recognize this as a possibility and position themselves this fall. Soybeans will have large yields again this year. This is three huge crops in a row. Is a fourth likely?

Our general bias will be for you to re-own soybeans with CALL options or get ahead of the game for 2007 and look at buying September or November CALL options. Use a rally to then price beans on the assumption of a normal crop. However, if the US or South America have a small crop, as prices rally and forward contract orders are triggered, you will have already re-owned.

If you have any questions or would like to discuss detailed strategies for your operation, please contact Top Farmer at 1-800-TOP-FARM, ext. 129.

With unbridled enthusiasm over ethanol demand and usage, the logical expectation for next year is that corn acreage could increase, mainly from soybeans. With high wheat prices this past summer and the wheat market in a rally mode this fall, it is likely that wheat acres will increase.

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