Soybean Markets – A Sitting Duck.
Written for Sevita by Bailey Elchinger, Risk Management Consultant, FCM Division of StoneX Financial Inc.
The Sitting
If one were to compare the price of the SX25 contract in the middle of August to the price it is in the middle of September, one would not assume much has happened in the market. In fact, there was quite a bit of news thrown at the market and a bit of volatility as well. As I like to say, “the market worked really hard to NOT go anywhere” which makes it appear like it is sitting still. A calm duck above the water.
The Paddling
Under the surface, the bean market “duck” was doing plenty of paddling as various news stories or “waves” were thrown at it. One of the biggest “waves” was the private industry yield tours, surveys, and estimates. One popular company that does a yearly yield tour through the corn belt, and is highly followed on social media, found gigantic soybean pod counts throughout the tour. Many of the private yield estimates were smaller than the August USDA yield, but nonetheless were still large compared to initial industry expectations. The weather at the end of August left a lot to be desired across the corn belt as extreme dryness set in in many areas. The dryness continued the social media discord and subsequent market volatility.
In addition to weather and yield concerns, the market was also faced with continued demand uncertainty. A key to this uncertainty is the total lack of any U.S. soybean export sales to China. Brazil has been the preferred origin for nearly all of China’s purchases. China also purchased soybeans from Argentina, which it normally does not do. I believe this was done as a ‘sign’ to the U.S. that China will do whatever it can to NOT buy soybeans from the U.S. The trade war continued through August with little to no progress being made.
The Waiting
Without clear direction, the managed money crowd has also been very quiet, not taking a large long or short position in the bean market. The September USDA report held plenty of changes on the soybean balance sheet. The USDA did lower yields slightly but more than offset it with an increase in acres. Crush demand was increased, but that was offset by a reduction in exports. Bottom line, the expected soybean carryout was increased 10 million bushels to 300 million, which is only 30 million behind the 24/25 carryout. If we continue to see yield declines from the USDA, which seems possible due to the weather, we will easily begin to tighten the carryout.
Thus, the market continues to wait. Wait for a trade deal. Wait for a yield decline. Wait for the farmer to sell. Meanwhile, the market is busily treading water beneath the surface to stay afloat.
While farmers are beginning to get busy below the surface as harvest begins, I would encourage them AND end users not to be a sitting duck. Don’t wait around for what the market and headlines give you. If we get a trade deal, I believe that the market will see that as very favorable for bean demand. If we don’t, I think prices could struggle. Thus, make a plan to take advantage of any waves that make the market move in your favor.
Recent Articles
-
//Market ReportA Swing and A Miss
The soybean market worked its way lower through the end of July, as crop conditions and weather forecasts appeared non-threatening to the U.S. soybean crop. Additionally, tariff headlines fueled managed money to continue to add new short soybean positions – holding their shortest net positions since last December. With the flip of the calendar to August, came the looming reciprocal tariff deadline. Several countries were able to make trade agreements with the U.S., while others (including China,
read more -
//Market ReportNavigating the Knowns and Unknowns
This month, there are a few more “knowns,” and still many unknowns in the soybean market prices. USDA June Stocks & Acres: The USDA lowered soybean acres slightly, to 83.4 million acres – matching planted acres in 2020. Soybean stocks for the current marketing year were higher than expected at 1,008 bu – the second largest soybean stocks numbers seen for June 1st, since 2020.
read more -
//Market ReportThe Price Puzzle
The USDA June WASDE report came and went, with no changes. Old crop and new crop demand were left the same – with the USDA likely waiting to make any further changes following the coveted Stocks & Acres report at the end of the month. As it sits now, planted acres are estimated at 83.5 million vs. 87.1 million last marketing year.
read more
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI . StoneX is a trading name of StoneX Financial Ltd (“SFL”). SFL is registered in England and Wales, Company No. 5616586. SFL is authorized and regulated by the Financial Conduct Authority [FRN 446717] to provide to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorized to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorized; regulated by the Financial Conduct Authority under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorized by the Financial Conduct Authority. StoneX Group Inc. acts as agent for SFL in New York with respect to its payments services business. StoneX APAC Pte. Ltd. acts as agent for SFL in Singapore with respect to its payments services business. ‘StoneX’ is the trade name used by StoneX Group Inc. and all its associated entities and subsidiaries.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
© 2022 StoneX Group Inc. All Rights Reserved.
