5 Soybean Risks To Guard Against

January 31, 2017 12:00 PM

Now is a good time to take proactive commodity-marketing measures on soybeans, in particular, says Mark Gold of Top Third Ag Marketing. That’s especially true in light of numerous risks surrounding the new crop.

“We’ve got soybean prices almost at $1.20 than we were a year ago at this time,” Gold told “AgDay” host Clinton Griffiths this past week at the 2017 Top Producer Seminar in Chicago. “We’ve got new-crop soybeans right around $10.25. We’ve had a nice rally here. As I’ve always said, American farmers have at least one good opportunity a year to market grain.”

In Gold’s view, top risks facing the soybean crop include:

  1. Acreage Outlook: Whether American farmers plant from 4 million to 6 million more acres to the crop this year, “I personally believe it’s going to be a higher number” than in 2016, Gold says.
  2. Yield Expectations: “If we continue to see trendline yields creep up, we’re looking at potentially a huge crop out here,” Gold says.
  3. China Orders: If China cancels orders for U.S. soybeans, prices could head lower.
  4. Trade Policy: A trade war with China, combined with other factors, could eventually leave a $6 in front of soybean prices, he cautions. That might not happen this year or even in 20 years, but it’s a threat that shouldn’t be ignored.
  5. Fund Activity: As of late January, the funds were long 130,000 contracts. “I think that’s a significant risk,” Gold says. “I believe right now what’s key is to be protecting these soybean prices.”

To add protection, Gold recommends buying $10 short-dated puts for soybeans. Each put should cost about 25 cents. Corn and wheat have upside potential, he says, but it isn’t a bad idea to purchase 15-cent puts for corn and 20-cent puts for wheat.

“If there’s a problem in the soybeans, corn and wheat are going to get dragged down with it,” Gold explains. “You’ve got to protect that risk, but you’ve got to take that opportunity you’ve got in the soybeans and take it today.”

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