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Beans Take Their Turn

The corn and wheat markets have had a significant fall from higher prices established in the winter months. December corn futures traded as high as $5.17, and, as of this writing, have traded down to $4.17. July wheat traded as high as $7.44 on May 6 and, as of this writing, have traded as low as $5.55-3/4. November beans, on the other hand, held up very well, reaching their peak on May 21 at $12.55, and in general holding near $12.30 (give or take 20 cents) for the better part of three months. However, a very negative crop acreage report had prices reeling, dropping sharply. Within a week's time period, they traded from a high of $12.46 to the low (as of this writing) of $11.32.

It was, perhaps just a matter of time before new crop beans tumbled due to  expectations for record large acreage and a record large crops. What caught the market off-guard this week was a double whammy of larger-than-expected stocks and acres. Acreage was anticipated at 82.17 million before the report. This alone would have been a big increase from last year's total of 76.53. The actual acreage figure released was 84.84 million, a figure above even the highest pre-report private guesses. Quarterly stocks were anticipated at 387 million while the actual figure was 405 million. Soybean futures dropped over 75 cents after the release of the report.

When stepping back and looking at the entire grain/oilseed complex, corn and wheat led the way lower this spring, and beans held up well. Tight old crop inventory and a tremendous export market in late 2013 and so far in 2014 suggested that old crop inventory may, in fact, need to be rationed. That could still be the case. According to the USDA, the increase in stocks may put the kybosh on those perceptions. As for new crop, a conveyor belt of big supply available this fall was the tipping point to send prices on the defensive. The entire soy complex has been softer on these expectations. For many, it was probably just a matter of time before some type of catalyst would push beans over the cliff. It now appears it was this week's Stocks and Acreage reports.

If you have questions or comments, or would like help implementing strategy for the year ahead, please contact Bryan Doherty at 1-800-TOP-FARM ext. 129.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

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