When the Going Gets Tough.”

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

The beginning of May saw the soybean market rally roughly $1 in 5 trading sessions. The calendar indicated that planting should have been progressing across the Corn Belt but there were areas that had not made any progress at that point. Weather forecasts were looking bleak with little promise of potential progress in the future. The fear of delayed and/or prevented planting led the market to put additional weather premiums in place.

"The Going"

In addition to feared planting delays there was also significant flooding in areas of Brazil. The majority of the crop in the affected area had already been harvested but there was fear of damages to the crops in storage. This fear did push a limited amount of export business back to North America. Perceived concerns over the planting pace and the optimism of increased exports helped push the SN24 contract above key technical resistance areas and directly into the $12.50 level. Once the move began to take shape on the charts some of the gains were extended due to the indications and bullish move technically. The technical move was also fueled by the managed money crowd covering their short positions. Due to the ‘delayed’ planting fears, there was limited farmer selling stepping in front of the short covering funds to slow down the gains.

Adding to the fervor was the renewed fears of inflation. Commodities were seen as a good ‘hedge’ against inflation from 2021 through mid-2023. That fear subsided as many assumed the U.S. FED would begin lowering interest rates and inflation was ‘solved’. As 2024 progressed we began realizing that inflation was not, in fact, under control. As inflation fears rose those interested in owning commodities also grew and contributed to some of the buying we saw this month.

"The Tough"

The demand side of the balance sheet saw soybean exports remaining steady and on pace to meet USDA expectations. Chinese demand for U.S. soybeans has been lackluster at best. Meanwhile, the NOPA crush report pegged the April soybean crush at only 166 million bushels, failing to meet even the low end of expectations. The year-to-date progress is still on pace to meet the USDA’s expectations for soybean crush. Chinese soy crush margins are running slightly ahead of breakeven, but not enough to entice additional bean imports. In addition, Chinese hog margins have been running at barely break even so far this year but have recently turned slightly more profitable. These two pieces are a likely contributor to the slow US export pace as well as part of the renewed demand optimism going forward.

"The Get Going"

As May continued, weather windows began to appear for the U.S. producers to plant. By the end of the month, corn and soybean planting paces exceeded the five-year average paces. This started to ease many of the fears that the market had regarding delayed planting. In addition, there were many rumors of Chinese bean vessel purchases throughout the month. As the month wore on it was realized that the vast majority of these Chinese purchases were almost solely done from South American supplies. Lessening supply and demand fears allowed the soybean market to set back from its recent highs and become more range-bound throughout the month.

When the going gets tough, the tough get going, and North American producers once again displayed this throughout May. It’s important to note that the new crop bean market is still roughly 50 cents off its lows from earlier this month, is it time to get going on your 2024 grain marketing plan as well?