Judging from what analysts at the U.S. Commodity Classic said, there could be a spring soybean and corn rally followed by a lot of downward pressure on soybeans in the summer.
Canadian growers would do well to pay attention because canola prices are tied closely to soybean values.
Two analysts at the Commodity Classic noted that there is usually a spring rally in U.S. corn and soybeans, as long as there isn’t a burdensome stocks-to-use ratio at the end of the crop year.
Read Also
China’s grain imports have slumped big-time
China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
Their calculations suggest that a rally to $10.85 in November soybeans and to $4.58 in December corn are not unreasonable assumptions.
That would imply a nine percent rally from current prices in soybeans and a 10 percent rally in corn.
However, two other analysts warn of the potential for a lot of downward pressure on soybeans in the summer.
They, like most analysts, still expect a big increase in American soybean acres. Record crops from South America will already be on the market, and compounding that supply could be a lot of old crop soybeans from Argentina.
A spring rally followed by a summer decline is not unusual in years when there isn’t a major weather calamity such as a drought.
So to reduce risk, it would be a good idea to closely watch prices this spring, talk to your market advisers and be ready to jump on profitable prices for some new crop production.
It was easy to make money selling crop at any time in the incredibly buoyant markets of a few years ago. However, in today’s market it will now be important to act when prices are profitable and lock in a portion of the crop.
March 31, which is the date of the U.S. Department of Agriculture’s farmer survey-based prospective plantings report, will be particularly important.
Like in Canada, American farmers this winter are more undecided than usual about what to plant.
USDA surprised the market Feb. 20 with a soybean seeded acreage forecast that was well below the outlooks of private analysts.
It sees soybean area at 83.5 million acres, down slightly from last year. Private analysts expected an increase of three to seven million acres.
The USDA number was a staff forecast, and it appears the trade largely ignored it, preferring to rely on their own surveys and observations, including seed sales and the belief that farmers will turn to soybeans because they have a lower cost of production than corn.
However in oilseeds the potential for a spring soybean rally looks better and the summer price outlook doesn’t look so bad if the more important USDA prospective plantings survey report does not confirm traders’ expectations for larger soybean acres and comes in closer to the February forecast.
This scenario gets a bit more weight when you read DTN analyst Darin Newsom’s March 1 report.
He said technical analysis of soybean price movement in February supports his contention of a long-term price uptrend first identified in October.
While tethered to soybean prices, canola could ride the upper end of the usual relationship this year because its expected year-end stocks-to-use ratio of nine percent is even tighter than for soybeans.
Also, there is a good chance the Canadian dollar could weaken further, adding support to canola prices.
All this might be heartening, but locking in a profitable price for grain that will be delivered off the combine is important for peace of mind.
Farmers who did that last crop year were a lot more comfortable when prices started to tank during the summer.
With locked profitable sales off the combine to pay their immediate bills, they could afford to wait for the usual post-harvest rally.
