After trading as low as $11.30 in late May of 2023, November 2023 soybean futures prices have enjoyed a two-month rally. November futures are now trading near the higher end of this year’s price trading range, and slightly above the $14.00 mark as of this writing.

The soybean market found support in early June due to hot and dry weather concerns. The market found its next boost of friendly news from the June 30 acres report, which showed a dramatically lower-than-expected planted acres number of 83.5 million acres in the United States for the 2023/24 growing year. The number was much lower than expectations, and down from 87.5 million planted acres one year ago.

With this smaller acreage news now as the cornerstone for soybean prices this summer, trade will quickly turn its attention to yield. The July USDA WASDE report pegged U.S. soybean production for 2023/24 at 4.3 billion bushels with yield pegged at 52 bushels per acre. The USDA has demand noted as 4.276 billion bushels, meaning there is not much room for error in terms of production!

Weather factors

August weather is critical to soybean production. Not too much heat and well-timed rains during this month can provide for exemplary yield. Conversely, high temperatures and no rain will put a damper on yield potential.

Therefore, weather-watching during the month of August is paramount. Mother Nature has the ability to ignite soybean futures prices higher if a scorching forecast is imminent or send them limping lower if perfect weather is at hand.

Looking at a daily chart of November 2023 soybean futures, there is a potential inverted head and shoulders formation forming which suggests $16.00 to $16.50 might be a target higher IF friendly news can be found to justify such a price breakout.

That friendly news would likely need to be hotter and drier August U.S. weather, an uptick in U.S. soybean export demand, and strong demand still occurring for domestic crush in the coming months.

Therefore, get your marketing plan ready. Depending on August weather and other fundamental aspects, soybean prices could either quickly rally $1 to $2 higher, or slide $1 to $2 lower, back to prices that we saw in early June.

Prepare yourself

Be ready for plenty of price volatility in the weeks ahead, as some traders may point to the dry start the U.S. soybean crop has had and fear that a record soybean yield is not possible. Bearish traders point out that hybrids have improved, and some rain coverage is better than no rain coverage. How will the markets respond? Assume the crop is record until proven otherwise? How does a farmer manage this?

An uncertain size soybean crop growing in the fields is nerve-wracking for any producer. It is hard to market what you are unsure will grow. It makes forward contracting potentially uneasy, because if the soybean crop doesn’t grow, you’re still on the hook to deliver soybeans to the elevator. How then does a producer protect new crop price value if it is deemed attractive?

One way to do that is to buy a put. Remember, if you’re buying a put, you’re protecting a price floor for your grain. And if the market should instead trade higher due to a flash drought, you are not dealing with margin calls and are able to take part in the rally with your cash sales. However, if the rains occur and soybeans prices fall lower, you’ll be thankful you have a price floor protected.

Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at [email protected].

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