Remember all the talk in mid-summer about the chance for a big rally in 2008-09 soybeans as supplies ran short and the new crop was months away from harvest?
Perhaps you were doing better things with your time than thinking about that – like growing a crop – but if you did pay attention to that chatter, you’ll also remember that the big rally didn’t take place. Buyers didn’t rush into the market and madly bid up prices, causing a temporary rally that could have spread to other crop markets. Buyers instead stayed cautious, bought hand-to-mouth with little fear, and got into the 2009-10 year OK. Prices rose, but didn’t skyrocket as many had hoped.
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But maybe all they did was kick that rally a little further forward, because since early October soybeans have been surging and strengthening the markets for most crops (in U.S. dollar terms, but that’s another subject). Soybeans in stock are still very low – even though a huge crop is in farmers’ fields in the U.S. – and buyers and grain companies are struggling to meet their obligations. For most of a month now little of the soybean crop has come off the field due to wet weather, so in practical terms there is not a big U.S. soybean crop for the next month or two.
They don’t have much choice but to bid up prices, which leads to a rally on the futures price and tighter basis levels at the elevator.
Back in late summer buyers and grain companies laughed off the threat of the soybean pipeline running dry.
Now it’s a different story, and a Hallowe’en fright has temporarily fallen on the buy-side. As actor Bruce Campbell said so memorably in his role as Ash in Evil Dead 2: “Who’s laughing now? Who’s laughing NOW?”
It’s not enough of a fright to scare the market too high, but it’s a good little shiver to shake some of the complacency out of the market and shake a few more pennies into farmers’ hands.
