Is May Report a Game Changer for Soybean Market?

May 11, 2016 02:10 PM
Is May Report a Game Changer for Soybean Market?

When there’s a 100-million bushel gap between USDA and trade estimates for new-crop soybean carryover, the market tends to respond.

That’s what happened Tuesday, when USDA released its May reports, pushing soybean contracts limit up as they hit their daily maximum gain of 65 cents. July and November futures prices rose more than 50 cents to close at $10.84 and $10.675, respectively.

Farmers and analysts alike are taking notice and considering what it might mean.

“When we get a report reaction like we did and we sustain it through the close, it could be a game changer in the bean market,” said Chip Flory, editorial director of Pro Farmer and host of Market Rally Radio, on his radio show yesterday.

Why are these numbers so important, apart from the financial boost they just provided to growers worried about thin profit margins?  It’s because they represent a break from USDA’s typical forecast pattern, according to Brian Grete, editor of Pro Farmer.

“Did the USDA get too aggressive?” said Grete, also speaking on Market Rally Radio with Flory. “Historically, USDA starts pretty conservative on the demand side and a little bit high—sometimes way high—on carryover.”

If that pattern has been reversed this year, it could make it even tougher to handicap the grain markets than usual.  

“Just because USDA says we are going to use a total of 3.925 billion bushels of soybeans does not make it so. It’s a dynamic number. It’s a moving number and price is going to have an influence on it,” said Flory. “What concerns the heck out of me is the pattern we typically see in carryover,” where high carryover pushes prices down, raising demand from bargain-seeking end users, who must then pay the demand-driven higher prices.  “If we’re starting low this year and getting a 50-cent rally right off the bang, what are we doing to our total demand?”

For now, though, growers might just want to do their best to take advantage of prices like $10.78 July soybeans. “We are now at price levels we haven’t seen in a long time,” said Grete. “We’re talking about years of price strength that we have made up since the March lows.”

Listen to the Market Rally discussion here:

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Spell Check

Pretend Pete
Washington CH, OH
5/12/2016 09:49 AM

  If this year didn't teach you something then you weren't watching. Grand-dad always said we can't count our chickens until they hatch. The Market was counting its chickens all the way up to early march, and Mother Nature had other ideas for Argentina in April. You want someone to blame ? Blame mother nature.

5/11/2016 07:25 PM

  the puppets made the bean price rise the limits so more acres will be planted into beans thus driving up the corn price after the acre report in june. see how easy it is to make money farming. oh wait the ones making money farming don't have a clue what a bean or corn looks like.

nebraska city, NE
5/11/2016 05:00 PM

  translation for those who don't speak "trader forecast speak". We don't know anything, everything we said about how nothing could make the beans go up this year is wrong and we are trying to cover are butts enough to make people believe we still have any credibility left, which we don't even believe about ourselves.