Can soybeans trade back to $13 or will they continue to slide lower?

By Jon Scheve, Superior Feed Ingredients, LLC

Last Tuesday January beans closed at their highest value since the October USDA report. Then the market dropped 50 cents in three days to end the week at the same value it traded a day after the October USDA report.

Can beans rally?

There are several factors that make a bean rally difficult right now. One, harvest reports suggest the U.S. bean crop is bigger than previously estimated. The Brazilian crop was planted quickly with adequate moisture. Combine that with large acres expected to be grown there and the trade suspects U.S. beans will have a lot of upcoming competition from the southern hemisphere by Valentine’s Day.

On the other hand, crushers are making healthy margins, which should keep a strong bid under the market and be a positive for beans. Also, Friday the USDA released their 10-year long term projection report that showed only a modest increase of 300,000 bean acres estimated to be planted next spring. This is less than what some market participants currently expect with high fertilizer prices. Additionally, this particular USDA report suggested that demand could remain steady compared to what is posted today.

Bean competition 

Canola prices have more than doubled in the last year due to drought conditions in the main growing regions of North Dakota and Canada. Sunflowers globally have been affected by dry weather as well, which is causing price rallies for that crop too. Both crops are direct competitors to beans, which should mean more demand pull on beans moving forward, especially with this price drop.

Looking forward

Brazil’s bean crop hasn’t even entered the stage where moisture is critical to crop development. It will be another month until timely rain will have a much bigger impact on bean yields. And with that more opportunities will come for weather scares and price volatility.

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.

Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results.

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