As soybeans continue to stick above $10, farmers and analysts are finding themselves riding a spring rally they never expected—for better or for worse.
“The drought was crazy, but this was about as nuts as it gets,” said Tommy Grisafi of Advanced Trading, speaking on U.S. Farm Report, about last week’s soybean market. “People were excited. I actually saw some people call in … (and say) they had forward sales in beans at $9, (asking) ‘What do I do now?’”
In other words, these growers were living one of their worst marketing nightmares.
“You could see that people had already given up control of the bushels at a lower price, and they were panicked,” Grisafi said. “I actually saw more … anger or disgust that we were rallying and that’s not what the farmer should be thinking. It’s a heck of an opportunity. We went from maybe a $50 loss per acre to a breakeven to an instant profit.”
“There’s a lot of confusion,” noted Joe Vaclavik of Standard Grain, also speaking on U.S. Farm Report. Farmers are asking “’Why is the market up? What’s going on? Why did I sell early?’” Vaclavik recounted, “but you can never complain about better prices. Every farmer in the country just went from a loss to a profit in beans in six weeks, and you’ve got to think of that as a good thing, even if you did make some early sales. … We didn’t want that market to stay cheap.”
The good news for growers who fear they may have missed out? This rally could have some staying power.
“According to the spreads at the Board of Trade, (the rally could last) a while, because you see (futures) for this November and November ’17 trading 50 cents over,” said Grisafi. “The market wants your soybeans. It wants them at harvest. It has a very high front-month premium, and so the front months are a bit above $10. When you look further out … we go back toward that $9.40, $9.30 level. It looks like the next 12 months have a story.”
“The best thing about this rally in the bean market is that we did it without a U.S. production problem,” he said. “Farmers still have all the potential in the world to grow a big bean crop, put a record yield out and capitalize on these prices, so that’s the best thing about it.”
It represents a significant shift in the soybean market. “Two months ago, everyone thought if the bean market rallies, it’s going to be because of a drought this summer,” Vaclavik said. “That’s not what we saw … We’ve had a little bit of shift in supply and demand. We’ve got Argentina crop problems. We’ve got some better exports. Crush margins have improved drastically since the first part of March.”
Add all those factors up, and the answer is $10 soybeans. “The landscape of this thing has changed quite a bit,” Vaclavik said.
Watch the segment here: