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Wish I'd been wrong about the beans

09/23/2011 @ 3:34pm

For the past two weeks I have discussed how the day before the September crop report has traditionally been a good time to sell soybeans. This is one time when I wish I had been wrong. Market action since September 12 has been about as negative as any time in recent memory. Those who followed my strategy and made sales on September 9 or before have to be pretty happy today.

The problem is that most of us probably did not sell 100 percent of our crop and are now faced with making a tough decision. Do we sell now before the price crops further or do we delay the decision and hope for a rebound? With the soybean futures price $1.42 below the trigger date, any sale made now has to be done with fingers crossed hoping that it is the lesser of two bad choices.

My strategy for selling new crop soybeans since is to forward price a portion before harvest and sell the remainder on the “Dead Cat Bounce” by the end of December. The increment that I currently have forward priced was done at $13.75 basis January futures. This allows time for the basis to improve following the completion of harvest. The current basis is -1.11 below January futures. By the end of December the basis should improve by at least 40 cents if it follows the usual pattern.

For those beans not covered by the hedges I am tracking the bounce for a signal to make the sale. I track the local cash price and the March futures price on the close every day. I began this process on September 9. Action since that date has obviously not given any sign of a rebound in either the cash or futures. The only price movement has been nearly straight down. The cash price at the close yesterday was $1.39 below the bid on September 9.

The long term chart shows the average date for the harvest low to be October 5. That date has been gradually working earlier in recent years. Only time will tell if it falls earlier or later this year. I hate to think that prices could go lower for another eight days. Prices today are roughly a dollar seventy higher than they were on the same date a year ago. That fact might encourage those who do not have any beans forward priced to make some sales even at these levels.

I will be tracking prices each day for any sign that it is time to pull the selling trigger. However, prices have to stop going down before there is any chance of a harvest low. That could happen today or it could be a month in the future. It will be better for all of us if it is sooner rather than later.

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