Just one week ago, the August soybean contract was more than $2 lower than where prices closed Friday. As outside money moved to the sidelines in July, commodity prices plummeted.
So, what changed in just a week’s time? Naomi Blohm of Total Farm Marketing by Stewart-Peterson says the main driver was the weather.
“The biggest indicator of this rally has absolutely been the heat that’s come back into the forecast and the minimal amounts of rain, along with the fact that right after Ukraine and Russia made that deal, Russia came back in and did some bombing,” she says. “So the market got spooked to see if those grain vessels that needed to leave the Black Sea region could actually leave.”
Blohm says the combination of those two things, along with what she called an oversold market technicality, was enough to fuel the market to have grain prices work higher.
“Now heading into the weekend, we’re up against some very significant resistance levels. So people should take note of that. We’ve had a nice rally, considering where we were just a week ago. So take advantage of this for some cash sales,” she says.
A Vulnerable Soybean Crop
Matt Bennett of AgMarket.net was also on U.S. Farm Report and agreed the market was oversold to start the week. He says the soybean situation as a whole is also very telling, but weather was the catalyst to spark this week’s rally.
“Obviously, old crop carry on, it’s just tight. New crop carryout is pretty darn tight
—you didn’t get the acreage that you wanted to get this year, and then the bean crop went in the ground late,” says Bennett. “And so you throw all those things together and you’re basically hoping and praying for a really good August weather pattern.”
Bennett says as he talks to clients across the country. He says the general theme is the U.S. corn crop is in better shape than the soybean crop this year. A vulnerable soybean crop, at a time when the crop needs rain to produce the bushels needed, was enough to send soybean prices higher.
“When you get 100 to 110-plus degree temperatures over the next couple of weeks, the first 10 days of August are predicted to be brutal,” Bennett adds. “And I’ve got to think that really calls into question whether we can even hit a 50 bushel [per acre] crop on a national basis, let alone 51.5 [bushels per acre].”
Higher Highs Aren’t Guaranteed
The extreme weather forecast to start July was bullish this week, but Blohm cautions producers about potential price resistance in the month ahead, especially with an upcoming USDA report that could reveal smaller demand.
“At the end of the day, I don’t know that ending stocks are gonna get a lot smaller because there can be that demand adjustment,” she says. “But seasonally take note that oftentimes
—starting at the beginning of August for two to three weeks
—November soybean futures and December corn futures do have a tendency to work a little bit lower untill we get into that harvest low. If we come in Sunday night, and the weather forecast has changed to show maybe not as much heat, or they put in some precipitation, you’re going to see that marketplace start to dwindle down. Outside markets are sensitive with the recession talk.”
She says the vulnerabilities of the market to recession concerns is causing her to be more defensive than normal with her marketing strategy.
“It’s been a feast or famine mentality,” adds Bennett. “It’s going to take a long time to sort out what these yields are going to look like. But by all means, I want to reward this type of market with some sort of sales or protect myself with risk management.”
