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EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

August Soybeans Parabolic

Jul 23, 2013

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August soybeans are going parabolic!  Yesterday the contract closed 29 ½ cents higher to make new highs for the move.  Today it closed 57 ¾ cents lower at $14.62 ½.  Crazier yet, cash basis dropped 65-75 cents.  For producers holding on to cash beans that is about $1.15-$1.30 a bushel less than yesterday in many parts of the country.  November soybeans closed 28 ¼ cents lower and December corn 12 ½ cents lower.  This is a new low move for December corn.

There were rumors that China could be selling up to 3 MMTs of state reserve soybeans which is a sign of lowered import needs.  This pressured the cash markets hence the soybean basis break.  On top of that the midday GFS run increased the chances of precipitation for the next few weeks alleviating some of the production concerns as we head into August.  Yesterday’s crop ratings showed only a slight decline for soybeans which could have also played a part in today’s selloff.

We have been talking about the excess premium built into the market for some time now.  We haven’t had excellent weather everywhere, especially in the western belt, but still we have trended lower.  In our opinion this excess premium is from market conditioning after having three disaster growing years in a row.  Many in the market have put a higher likelihood of a repeat weather disaster than probably necessary.  As we are getting past some of these monumental points in the year like pollination, more premium comes out.  Soybeans are in that stage where a weather problem could still develop.  We put that chance the same as any other year.  But if we get into August and rains are adequate, look out for the large long position in beans to run for the exit.

If December corn keeps breaking it may start to get into that territory where revenue insurance starts paying.  If a producer grows exactly 100% of his/her actual production history and has an 85% RP policy, he/she would be protected below $4.80 ¼ ($5.65 x .85).  There is plenty of year left so if we really dip below this level it may not be a bad idea to get/add call protection on just to protect your sales and insurance.   It is important not to do this if you do not have enough downside protection.  To see how this strategy may help your marketing plan give us a call for a free consultation using the AgYield software.  You can plug in your current sales, insurance, futures and options, and cost of production to see how future transactions can help or hurt your bottom line.

EHedger  |  866.433.4371
Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.
EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.


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