The Soybean ‘Playground’

Written for Sevita by Bailey Elchinger, Risk Management Consultant and Regional Director, FCM Division of StoneX Financial Inc.

"The Swings"

The soybean market has had plenty of ups and downs since the beginning of 2024. It often felt like we were on the swing-set at a playground. We experienced being at the ‘top’ of the swing’s pendulum and the impending swing lower. Sadly, we weren’t very good and keeping our momentum and the height of our swinging became less and less as the summer progressed. The fear of a crop failure subsided and thus our swings became smaller and smaller. To end the month of August the November bean contract started to lift its swing higher before deciding to move to another playground apparatus.

"The Merry-Go-Round"

Since early September the bean market has been on the merry-go round. It continues to go ‘round and round’ without REALLY going anywhere. We seem to be stuck between the prospect of a very large US soybean crop and dryness developing in South America. With over 87 million acres planted of Soybeans the U.S. did not need to grow a record yield to still solve any supply issues we faced in the past. Weather in the main growing areas of the U.S. was near ideal for most of the growing season, spare isolated areas in the ‘fringe’ areas of the corn belt. Private yield estimates seem to validate the government’s estimates as well, furthering the belief that we will, in-fact, have a large supply for the 2024-2025 marketing year.

"Seesaw"

Similar to the merry-go-round, the seesaw apparatus has seen the bean market go up and down repeatedly allowing both producers and consumers to enjoy the rise and fall. The rise and fall have been very narrow so far this month, making it a fairly dull time for the bean market. When prices fall the end users are willing to get more coverage and the funds aren’t willing to add to their short position. When prices rise the North American farmer steps in as a seller, finally releasing their remaining 2023 crop and begin selling their 2024 production. This seesaw action above the recent contract lows in the SX contract has led many to ask the question “are the lows in”. While I am not a fan trying to pick highs or lows it does feel that to extend to new lows we will need to see a new story. The supply side of the ledger is fairly ‘known’ at this point, thus that new story will likely need to come from the demand side. What unknown demand story will drive the market materially higher on the seesaw?

"Monkey Bars"

Later in the month of September the bean market appears to be trying to pull itself up on the monkey bars. The U.S. Federal Reserve lowered U.S. interest rates by 50 basis points in mid-September. Part of the strength that the commodity markets saw from 2021-2023 was due to the inflation and the fact that commodities are often viewed as a strong hedge against inflation. As the market believed inflation was under control a bulk of the outside funds left the commodity markets and were put into other markets. There is fear that the lowering of interest rates will reignite inflation and that fear may suggest that outside funds will flow back into the commodity sector. These fears would act as the monkey bars that the bean market can pull itself up on.

Even though the bean market has been on the merry-go-round and seesaw all summer there have still been opportunities for producers to manage risk. It’s important to be realistic in our marketing plan, enjoying the ride that we are on, and being diligent to avoid falling off at the bottom of the swing.