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Where are we headed with soybean price risk premium?

Where are we headed with soybean price risk premium?

Soybean prices are backpedaling this morning, but most inside the trade suspect we will find more heavy support down between the $9.75 to $9.85 area.

The bulls continue to sight improving crush margins and strong Chinese demand as reason enough to continue driving prices higher. The bulls are also questioning the number of soybean acres that will be planted next season in South America and how well the weather will cooperate.

I'm also still hearing concerns here at home about the heavy rains down South and damage that may have been done to the soybean crops in several select areas. I'm not saying it's enough damage to sway the trade in a dramatic fashion, but with everything added together it might be enough to cause the bears to pause, at least pause for a while or until they learn more specifics and details about the entire U.S. crop.

Demand is simply so strong the market can't afford to have any hiccups or glitches in production. If the U.S. crop ends up being as big or perhaps bigger than the USDA is currently forecasting, then I have to imagine some of the current risk-premium could come out of the market.

On the flip-side if we see just the slightest bit of production uncertainty creep into the headlines, market participants could get a lot more nervous. As both a spec and producer I feel like we are trapped in a wide-range somewhere between $9.20 and $11.20 per bushel. I hate to be so vague and broad with my price forecast, but I suspect this market will remain extremely volatile during the next 90-days. 

Similar to corn, there are just a ton of moving parts, that could quickly and dramatically change the overall sentiment of the trade. Right now most of the big players seem to be taking a "wait-and-see" approach.

I find myself in the same boat. As a producer, I continue to keep a close eye on the NOV17 contract, as I would like to reduce a bit more long-term risk on a run up in price.  Staying patient and expecting more extreme swings in price...          


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