The prospect of a 2012-like drought could drive soybean prices to the $13 or even $14 range, says Brad Matthews, Roach Ag Marketing. Yet the record-long position of the funds also suggests that if a weather event fails to transpire, prices could drop rapidly below the $11 mark.
Prices in the middle of a drought-like event would be fueled by tight soybean supplies.
“The 70-day supply for the world, if we have a couple bushels off of our yield here [in the U.S.], starts to rival the 2012 70-day supply on hand,” Matthews tells “AgDay” Agribusiness Update host Tyne Morgan. “That starts to talk about $13 to $14 soybeans.”
- Bill Kirk of WeatherTrends360 predicts a 2012-style drought in 2016.
- NOAA expects drought to develop in Penn., northern Minn., western N.D.
Alternately, favorable growing conditions could push prices partway down the futures staircase.
“It will be ugly at first,” Matthews says. “You will have probably a quick, hard break because of profit-taking by the funds. They have a record long position right now. That will drive us pretty quick initially. At that point, you’ll probably consolidate and wait to find out what kind of a crop we have. If we produce the yield that the government says, and we have great weather, I also think there’s probably going to be more soybean acres planted. Then we will have a whole … leg lower at that point in time.”
In the near term, it’s hard to say where old-crop prices are going. Right now, soybean meal is skyrocketing, though “at some point, you will have some form of a blow-off top.” Meanwhile, producers should consider sales in the $11 range on the new-crop November contract.
“I think that there should be a good break in the market here within the next 30 days,” Matthews says. “But then, similar to what could happen in corn, we start talking about a La Niña pattern. Very quickly the balance sheet gets very, very tight, both domestic and world, if we have a yield reduction.”
Click the play button below to watch the complete “AgDay” interview with Matthews.