Bean outlook

By Jon Scheve, Superior Feed Ingredients, LLC

Everyone wants to know how bad the South American bean yields will be. Unfortunately, it is extremely difficult to predict upcoming bean yields there accurately. Even in the U.S., most farmers I know are unwilling to estimate their bean yields before the combine is in the field, let alone a month or two before.

The bean rally over the last few weeks is mostly due to persistent dry weather in the southern third of Brazil and much of Paraguay, which usually produces about 10% the size of Brazil’s crop. While crops in both of those countries have suffered, the extent of yield reductions is still uncertain. Last summer predictions ran wild on how bad U.S. bean yields in the northwest soybean belt would be. In the end, farmers in those areas were surprised their yields were not as badly affected as originally feared. Similarly, it seems just too early to estimate final bean yields with any accuracy in South America right now.

Argentina’s beans have more growing season ahead of them, so weather there could still have a big effect on final yields. 

This leaves the U.S. bean supply as the global “bean back up” plan. If everyone else runs out, U.S. beans become much more valuable. At the end of the day, it will come down to weather and if someone could predict weather long-term accurately, they could predict future prices too.

If South America’s crop continues to be reduced, U.S. bean prices will increase. If this happens it potentially could cause an acreage battle with corn in the spring.

Corn outlook

Corn prices appear to have stalled temporarily. Ethanol stocks are extremely high, and profits at those plants have dropped significantly on the recent rally. Plus, rail tank car logistical issues are slowing movement of finished product too. For prices to rally higher, dry weather in Argentina later this month will be needed to help push export demand back to the U.S.

Market action

On Jan. 25, an open order to sell March corn futures at $6.25 I had in place was hit. The order was on 10% of my 2021 production. I am now 60% sold on my old crop corn.

Please email 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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