Abundant rainfall in the Midwest in recent weeks has pressured Chicago soybean futures, putting farmers in a quandary on how to market the drought-shortened crop in the Mid-South and Southeast.

Last week’s “mildly bearish” 2006 production forecast of 3.09 billion bushels, which was up 6 percent from August and up slightly from 2005, may make it even more difficult for farmers to find profitable prices for selling their beans. If realized, it would be the second biggest crop on record.

Veteran soybean analyst Roy Smith, a farmer and marketing speaker from Plattsmouth, Neb., says growers have at least two options to consider: 1) Sell futures now, planning to hold the position until harvest or 2) wait for the “dead cat bounce,” the name for a post-harvest rally that Smith coined a number of years ago.

“Unfortunately, cash soybean prices are now so low that forward contracting will result in returns below loan rate in most locations,” says Smith. “Even though odds are almost 90 percent that prices would drop after the Sept. 12 crop report, there is risk in selling at this point. If prices would go higher, you have locked in a loss with the possibility of no LDP.”

Smith says selling futures for short-term speculation means farmers will be trying to pick the harvest low to take their profit from the sale. “You will be trying to pick that low anyway to get the most LDP.”

Last year, he notes, the high of the dead cat bounce was greater than the high the day before the September crop production report. “In that case, waiting was better than selling ahead. I fear the negative psychology caused by huge anticipated stocks (530 million bushels, according to USDA) could cause futures to drop even further before the rally following the harvest low.”

Smith says growers should also consider doing some of both. “My preference is to market a portion of the crop using each of the previous strategies,” he says. “This approach at least spreads the risk.”

The Nebraska farmer says history is on the side of market bears who believe Chicago futures will continue to fall in the weeks following the September crop report. “In previous years, the down move following the September crop report has the highest odds of any seasonal trend during the marketing year,” he said.

“History shows that soybean futures prices dropped 17 of the last 19 years from the day of the report through the third trading day of October. The notable exception is 2003 when anticipation of reduced yields due to drought in August caused prices to rally 55 cents. In no other year since 1980 did prices go up more than 18 cents.”

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