Always an exception
One of the principles in grain marketing is that the words “always” and “never” do not apply. Researchers look for 95 percent probability when doing agronomic investigations. In marketing research anything that repeats more than 70 percent of the time is considered reliable. To have an event repeat eight times out of ten is almost unheard of. Marketing facts do not stand up to the same stringent scrutiny as those based on biological study.
The exception is that there have been two events in the soybean marketing year that could qualify for the description of “always” and “never”. Since 1980 there has always been a dead cat bounce in the cash soybean price sometime in the October to December time period. The bounce in price for the 2010 crop of soybeans was the biggest in history. That “always” still stands.
Since 1980 the highest price of the marketing year has never come in February. One look at the current chart of soybean futures prices makes me wonder if the record of not having the highest price of the year in February will be broken this year. Until today, February 18, it appeared that the resilient soybean futures market had a good chance of rebounding and resuming the trend higher. Having the price more than 30 cents lower for the second time this week leaves me less confident of a continuation of the uptrend.
Considering that the recent government report was more bullish for corn than for soybeans, we shouldn’t be shocked that soybean prices have dropped following the report. A correction was overdue. There is always the possibility that the current retraction is just a correction in the strong trend higher. Given the fact that the up trend continued through a period when prices are normally headed down, having a new high later in the spring seems like a good possibility.
On a side note, I learned my lesson in using those two words when doing a marketing meeting in York, Nebraska many years ago. I told the audience at that meeting that it ever hails at my farm. Hail is a major risk in the flat lands of central and western Nebraska. The audience response was “Never say never”. A more accurate phrase for me would have been “Since 1926 there has not been a hail storm on my farm”. Ten years later there still has not been a hail storm on my farm.
A good description of the current soybean market would be to say that in the last 30 years the highest price of the marketing year has not come in February. There is a strong fundamental reason for the soybean price in February to be low in most years. The fundamentals are different this year. The price action has also been different so far. Maybe this is the year that will break the “never” occurrence.