Nice soybean rally

ff_admin
Farm Forum

5/3/16 — Soybeans have had a nice rally recently, pushing up on a combination of some problems in South America as well as very strong demand from China. Prices of soybeans also may have just gotten somewhat cheap last winter when the market formed a bottom at around $8.50. That basically represented a $1.50 to $2.25 per bushel loss for soybean producers, so selling there would have been devastating to producers.

But prices have rallied nearly $2 since last fall, and now its time to reward that rally with at least some sales, especially for those producers who haven’t made sales yet of 2015 crop.

Planting progress is moving along, with corn at 45% complete vs. 30% normally, and soybeans at 8% planted vs. 6% normally. We still have a long ways to go to completion, but that is a good start. Cotton is 16% planted vs. 18% normally, sorghum at 23% planted vs. 26% normally, so southern producers are still struggling with cooler weather and wet conditions to get the crop planted. But that isn’t the case in the Corn Belt or Northern Plains. Right now, sugarbeets are 80% planted vs. 48% normally, so they are going in the ground at a fast pace. HRS wheat is 54% planted vs. 39% normally, with barley 57% planted vs. 47% normally so the Northern Plains as a whole is in good shape planting wise. Oats are 78% planted vs. 65% normally, which is kind of an indicator about how early some Corn Belt producers have been getting in the fields.

Winter wheat is 42% headed vs. 34% normally, so not only is the crop in good shape, but it also is developing rather nicely, too. We are about out of the realm of having any frost risk in winter wheat as, after all, it is May. And the other problem wheat bulls have is that the crop improved again this week to 61% rated G/E, up 2% from last week. Our Pro Ag yield model went up again to 49.26 bu/acre, up 0.34 bu/acre from last week and would be a record shattering yield. That might be why prices are struggling in spite of the soybean rally.

Overall, we do not have a crop problem developing yet for the 2016 crop. Actually, we are ahead of normal planting progress for corn, soybeans, and HRS wheat and soil moisture levels are good. So we have no sign of a crop problem developing. We seem to just be building a premium in for a potential problem yet this summer. In fact, winter wheat crops are quite a bit above average in crop ratings, so it looks like we will have a bumper crop yield there as well.

We are not necessarily bearish grains in spite of the lack of a crop problem because prices are still relatively low. But on the other hand, we do want to reward the market rally in soybeans to date of nearly $2 in the past month. It’s time to take some of the chips off the table.

We hit our price target of $10.45-$10.50 July soybean futures to get the first 20% priced 2015 crop in catch up sales. Target $10.45 November futures to price the first 20% of 2016 crop as well.

Weather forecasts for the near term includes mostly dry weather across the U.S. the next 7 days, with the only exception the far western U.S. with most of the Corn Belt dry. That will accelerate planting the next 7 days, with the 8-14 day forecast returning to more normal precip. The next 7 days will have above normal temps in the northwest, but still below normal in the southeast. It will be interesting if the market can hold these recent gains with no real threat yet on the horizon. As always, time tells the tale!