Building on $10 beans

By Jon Scheve, Superior Feed Ingredients, LLC

The buying continued this week, with all grains posting healthy gains. Beans continued their rally and are up $1.80 per bushel from Aug. 10. Several reasons for the huge run up are the low potential yields, big purchases by China and possible adverse weather in South America during their upcoming growing season.

Corn seems to be along for the ride. There have been some nice export sales, but corn yield potential looks pretty good at this point.

Early harvest reports

As the corn harvest begins, early observations suggest that areas that looked very good in July haven’t been impacted much by the late August heat. Even the areas that were dry in both July and August are seeing yields generally in line with what farmers were expecting.

Early bean harvest reports are limited and show wide-ranging yields. So far, many farmers are disappointed with early yields, a few say it’s better than average. It will take another 2 weeks for more accurate yield information to become available.

On Monday 9/14/20, I sold my first 25% of 2020 beans at $10 futures. I’d been waiting since June 7 of 2018 (over 27 months) to sell $10 new crop beans again, so I didn’t want to miss the opportunity. I hope it’s the worst level I sell all year.

Last February, when March ’20 beans were trading $8.90 and November ’20 beans were $9.25, I gave a marketing presentation to a large group of Nebraska farmers where I discussed the possibility of the market trading above $10 again. I told the group of farmers for this too occur that the U.S. needed to plant less than 85 million acres of beans, yields would only need to be near trendline, but exports needed to reach pre-trade war levels. Eight months later, most of these requirements are being met, and prices are above $10.

That makes 13 of the last 14 years where beans traded $10 at some point during the marketing year. In each of those 13 years, $10.50 was also eventually hit. On Friday, November ’20 beans traded just over $10.46, so I’m hopeful the rally will continue.

In 9 of the last 13 marketing years beans hit $11, and then eventually $12, too. While that would be great, given current global factors, $11 beans may be tricky to hit. It would likely take a U.S. yield reduction, increased China exports, or some weather issues in South America.

I’ll continue to hope for $11 to $12 beans, but I’m certainly happy with $10+ beans right now.

Please email jon@superiorfeed.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.

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