September 11, 2020
In USDA’s August WASDE report November soybeans were trading in a range from 867’0 to 883’4. Today’s September WASDE report has November soybeans touching 998’0 in the day session.
In one month, soybeans have rallied roughly $1.30 per bu., showing how quickly a trend can change.
Today’s report showed soybean yields were in line with estimates at 51.9 bpa, which is still above trendline yield last shown in the June WASDE at 49.81, but lower than August’s 53.3 record yield estimate.
Recent Brazil production estimates show 126MMT for 19/20 and 133MMT for 20/21, an increase of 19/20 of nearly 4 million metric tonnes and a potential record new crop ahead.
Funds go long
Funds have built a long position close to 200,000 contracts, which is not a record, but it is the longest funds have been this time of year since 2012. Three other years in recent history, 2014, 2016 & 2018 all had funds build a long position that topped out at just above 200,000 contracts before they decided to turn the other direction.
On the flip side, basis is staying firm as buyers are looking to source bushels for the looming export program and production estimates still leave uncertainty ahead. Comments continue to circulate about whether last year’s crop was overstated; are we figuring it out now, while September soybeans are in delivery?
With Brazil gearing up to plant with profit levels 40% higher than the last several years, funds are near record long, and yields are still above trend.
What’s it all mean? September is shaping up as the best month to sell since June 2018.
What are you waiting for?
At some point in the year, you will need to be 100% sold. The soybean price curve has no carry, which means end-users want bushels now.
The price for November ‘20 at 996’0 is higher than July ‘21 at 994’6. It makes marketing sense to sell cash bushels for fall delivery ensuring cash flow and reducing downside risk.
The market is not paying you to store soybeans, even if you have your own bins. If you have the desire to maintain ownership, a simple vertical call spread which is not marginable can be used to maintain length on paper while eliminating the downside risk of the futures.
Take advantage of the recent rally and lack of carry in the soybean market by selling physical soybeans and own July call options to re-own those bushels for upside potential and fixed downside risk.
Cardwell is a broker with more than 10 years of experience. Reach him at [email protected]. For more details on how this works, contact AgMarket.Net at 844-4AG-MRKT, 844-424-6758.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through ADMIS in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading infromation and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you.
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