The July WASDE report is in the rearview mirror with plenty of surprises, as many in the trade expected. While the June Planted Acreage Report set the groundwork for a supportive environment for this bean market, it put pressure on corn. Today I’m going to focus more on soybean prices, as I think the discussion is one that needs to be highlighted.

When we saw the USDA print 83.5 for bean acres at the end of June, many thought bean prices would skyrocket. Given already tight carry-out numbers, such a low acreage number certainly puts pressure on the U.S. grower to raise a big yield to keep us from running out of soybeans this coming marketing year.

As we moved into the July WASDE, traders felt we’d see the new-crop carry come in somewhere around 200 million-bushels, but the USDA instead put carry at 300 mb. Given how poorly US new-crop exports have been running, the USDA likely had a good reason to slash export 125 mb like they did.

This sent prices reeling on Wednesday after the report was released. Given a bigger U.S. carry (by 50%) as well as a ballooning world balance-sheet, sellers were active at the first sign of a dent in the bullish US situation.

Fast-forward to Thursday. With a flash sale to Mexico as well as talk the Chinese were seeking U.S. beans, the market came back to life. While we lost 32 ½ cents off of November beans on Wednesday, we got that back and then some on Thursday.

With a close just shy of $13.70, November beans kept a recent uptrend in place and are within 80 cents of the life-of-contract high. This sort of price action sure makes many of us want to get bullish. We’ve all seen beans take off on a dollar rally when least expected, so selling after such a strong rebound isn’t always a popular thing to think about.

A different approach

My personal opinion when it comes to beans is to look at this rally a bit differently. Many producers around the Corn Belt are looking at close to $13.50 out of the field at current prices. How does $13.50 work for most producers? Given it’s only been a few weeks back on May 31 when we were $2.30 lower at $11.40, I can assure you today’s price works better than at levels over $2 lower.

My whole point here is to run the math. Work your numbers and see how good a price like $13.50 works for you at the type of yield you’re expecting. If it works, hedge off some risk.

How we manage that risk is up to the individual producer, but for me, I want to keep my flexibility. I like buying a put option or a put spread-and in the case where a producer is willing to put a ceiling on prices, sell a call or two up at $15 or so to cheapen the cost. Another way to latch onto some of the profit margins in a flexible manner would be to sell beans as an HTA or fall delivery, then buy a call spread. This will give the producer a chance to participate should the market rally higher after we sell some of these beans.
I know it’s tough to market no matter where prices are. However, I’d be cautious as to turn my nose up at prices this close to $14 at a time when world stocks are growing so rapidly.

I hope you get plenty of rain these next few weeks --good luck with the rest of the growing season.     

Feel free to reach out to me or anyone on the AgMarket team. We’d love to hear from you.

Reach Matt Bennett at 815-665-0462 or [email protected].

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