Buy Puts Before June Acreage Numbers, Analyst Says

Soybeans end the week on a strong note as market bulls continue to maintain control of the market. We ended the week with a 12¼ cents gain. This was the 11th week out of 12 that we had a higher settlement. This was the seventh week of a higher close. We have not seen a move like this in seven years. Volume was on the lighter side since some in the trade took the day off.

Weather was viewed negatively as the eastern Corn Belt did not get the early-week rains as forecasted, and that has allowed producers to make huge strides in getting this year’s crop planted. Money flow continues to dominate the markets’ near-term direction. It was money inflows that have been the primary driver of the move higher the past few months. When the inflows stop, the move higher will stop. We anticipate that the market will continue its wild day-to-day price swings until the trade gets a better handle of Argentina crop size, potential acreage adjustments on the June 30 reports, and the summer weather.

With many in the trade anticipating a hot, dry summer, they will hesitate to get too bearish until we see how accurate the forecast is. Long-term, I would recommend buying puts in front of the June acreage numbers because I think we’ll see a big increase in bean acres (possibly 2-plus million) compared with the March numbers. If we increase acres as anticipated and do not have a major weather problem this summer, we will have more than enough beans to meet the USDA’s aggressive demand outlook.

The markets will be closed Sunday night and Monday, opening back up Monday night. Have a good Memorial Day weekend, and remember to reflect on all those who gave their all in defense of our country.