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Still Firm Price for Nearby Soybeans

It is a telling sign regarding demand for a commodity when at harvest, in the midst of higher-than-expected nationwide yields, grain prices rally instead of fall. That’s exactly what is happening throughout the Midwest. Producers are selling beans out of the field since the cash price is much more favorable, and they’re opting to store corn at home.

Normally when producers sell aggressively at harvest, the elevators are flooded with supply and the cash price will sour compared with the Board price. Not this year. Basis on soybeans has been relatively appropriate – even firming in some locations. When that happens demand is strong, and the market is trying to tell us something.

While South America is on track for another year of record production, the crop is not available yet. The world is relying on the U.S. for soybeans, which is why our exports have been strong particularly at harvest when supplies are most plentiful. From now until March the U.S. will be the main country of soybean export business. In addition to soybean exports, soybean oil exports are in demand due to smaller supplies of palm oil from Malaysia.

If you look at the prices of soybeans on the Board of Trade, you will notice that the January and March futures prices are trading much higher than the November 2017 futures prices, reflective of demand being strong now for supplies. We expect that trend to continue into year-end. By that time, trade will know if the South American crop will have any production issues (due to the impending La Niña weather pattern), either from weather stress or pest/fungicide issues.

When looking back at soybean futures, prices were trapped in a sideways trading range for nearly three months. When we see this, we as advisers are reminded that the longer a market can trade sideways, the bigger the breakout can potentially be down the road. Soybean futures recently rallied through the $10 price level, and if this buying trend can continue, the technical upside looks close to $11. Top that off with the possibility of La Niña picking up steam to affect South American production, and soybean markets could get really interesting. 

 

If you have questions, you can reach Naomi at nblohm@stewart-peterson.com, or post a marketing question on the Women in Ag Discussion page.

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2016 Stewart-Peterson Inc. All rights reserved.

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