- MARKETING -
Unusual Seasonal Trends
|By Melvin Brees|
A lthough prices do not always increase in the spring, significant price declines from winter into spring are unusual. But, it does occur. In the last 20 years, prices have declined about 15 percent of the years for corn and 20 percent of the time for soybeans during this time of year. 2010 appears to be another one of those counter-seasonal years.
New crop soybean futures prices have lost nearly $1.30 per bushel, but have stabilized somewhat and are currently about 90 cents lower than in early January. Record 2009 production, increasing ending stocks projections and larger crop acreages intended for 2010 are among some of the factors contributing to these declines. Increasing world grain/oilseed supplies, volatility in energy prices, strength in the dollar and speculative fund liquidations are among other factors credited with contributing to these price declines.
Strong soybean exports have supported soybean prices and USDA’s April projections were increased another 25 million bushels. Many analysts had expected USDA’s 2009-10 soybean ending stocks to increase somewhat, but the projections were left unchanged at 190 million bushels. However, large South American soybean production is expected to increase world soybean carryover to record levels.
U.S. 2010 soybean acreage is also expected to expand from last year’s 77.5 million acres to 78.1 million acres. With large South American supplies and increased U.S. new crop production, U.S. soybean carryover could increase significantly for the 2010-11 marketing year. This suggests that soybean new crop price rallies may become harder to come by, and several analysts forecast prices slipping below $8.00 per bushel.
The expectation of making sales on spring price rallies is not working this year. However, new crop corn and soybean prices are still at profitable levels. Since mid-January, new crop soybean futures prices have ranged from about $9.00 to nearly $9.50. Sales near the top end of the range would net cash prices near the high end of most new crop soybean price projections ($8.00 to $8.80) and maybe not a bad place to make some pre-harvest sales.
If prices break out the top of the range, additional sales could be delayed using some method of following the uptrend (scale-up sales, trailing stops, etc.). A downside breakout below $9.00 would suggest adding to sales to avoid having to accept lower prices at harvest time.
Market plans should be adjusted to protect some profit margins or breakevens to guard against the potential for significantly lower prices at harvest time.
Read Melvin Brees’ “Decisive Marketing” in its entirety at www.agebb.missouri.edu.