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U.S. Farmers Rush to Sell Soybeans Early as Prices Rally

By Mark Weinraub

CHICAGO, May 31 (Reuters) - U.S. farmers have sold nearly double the usual amount of new-crop soybeans this spring, taking advantage of a 14 percent rally in the futures market to lock in profits on a crop that most have not even finished planting yet.

The sales could depress soybean basis bids - the difference between the futures market and the cash price - at grain terminals around the U.S. Midwest during harvest. Soybean bids for delivery during the autumn have already begun to sink as futures have rallied during the past two months.

Angie Setzer, vice president of grain for Citizens LLC, which operates grain elevators in Michigan, estimated that her clients have already booked sales accounting for about 30 percent to 50 percent of new-crop soybean production.

In a typical year, farmers' soybean sales average about 15 percent to 25 percent of expected production by the end of May.

"Most of them are taking advantage of it (the rally)," said Setzer. "It is definitely one of those things where anytime you are given an opportunity at profit you want to take it."

Farmers were reluctant sellers of soybeans a year ago despite a rally that pushed prices to six-month highs early in the summer amid soggy field conditions that raised concerns about how big the harvest would be.

After missing that rally, growers fought a bearish market as record yields pushed prices sharply lower while they sought to move harvest supplies, booking sales at levels far below the summer peak.

Grain dealers already have begun to cut their bids for soybeans that will be delivered to elevators and processors this autumn as they have inked contracts with farmers. In Decatur, Illinois, November soy bids have fallen by 32 cents - dropping from a premium of 17 cents above the futures market to 15 cents below - since early April.

HEDGES IN PLACE

Grain merchants have already hedged new-crop purchases in the futures market to guard against price swings.

Commodity Futures Trading Commission data released on Friday showed that commercial traders, a category that includes grain elevators, shipping terminals and processors, boosted their net short position in Chicago Board of Trade soybean futures to 274,614 contracts, which represents 1.37 billion bushels.

That compares with a net short of 151,230 soybean contracts at the end of March. A year ago, commercial traders held a net long position of 42,284 soybean contracts. From 2006 to 2015, the average holdings for commercial traders at the end of May was a net short of 155,364 contracts.

Farmers remain cautious, however, about selling corn, despite an 11.7 percent gain in the futures market that represents the biggest growing season rally since 1973.

A spell of heavy rain and cold temperatures followed planting in parts of the U.S. Midwest, raising early concerns about harvest shortfalls which could prompt price spikes and preventing farmers from pulling the trigger on sales of the yellow grain.

Setzer said that farmers in her area have sold about 5 percent to 15 percent of expected new-crop corn production, which is in line with past years.

Roger Hadley, a farmer in Woodburn, Indiana, said he has already committed to sell just 15 percent of his expected corn production, compared with 50 percent of expected soybean production.

Forecasts for a La Niña weather event that could dry out the U.S. Midwest during critical growth periods for corn curtailed his sales activity this spring even as cash prices neared $4 per bushel.

"If we end up hot and dry, we are really going to be hurting," said Hadley "That is a real, real threat out there. If we end up with half a crop of corn and you start pricing it at $3.85 a bushel, you are still losing money." (Reporting by Mark Weinraub, editing by G Crosse)

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