As Planters Roll, Soybean Futures Want to Run

Perspective can be a funny thing.  Just today I was looking with a neighbor on putting a border post on the corner of a field that divides us.  It just so happens that I cleared some land behind my neighbor and the old corner post disappeared in the bush about 100 years ago.  Time has made them disappear but we are good neighbors and we want a post in just so everybody knows where the boundaries are.  The only problem is standing there trying to figure out where the bush used to be is kind of hard.  The perspective is all gone.  I can’t see those trees anymore.

Just as the perspective of where I am in the field is fooling me, the same can be said about our grain market perspective.  On March 31st the USDA told us the way it was going to be.  There was going to be corn everywhere and a lot of soybeans too.  However, the events of the last few weeks with soybeans prices surging over $10 futures shows us that something might be up.  The question is what is it?  Or is it just a flash in the pan?

It is difficult to know with all certainty what has happened since the beginning of March.  A $1.50 increase in the futures price for soybeans is nothing to shrug off.  This was unexpected by the grain chattering classes.  Sure, we have some wet weather in Argentina and some hot weather Brazil, but the last time I checked we have over 100 MMT of soybeans in South America.  It must have something to do with those black pools of investment capital surging back into commodities.

Can I explain that?  I would be lying to you if I could.  Yes, I usually class that as noncommercial demand, which is critical to any price movement in grains.  Simply put since March they have been moving creating pent-up demand that is hard to decipher.  Add in the problems in Argentina and it has just been enough to make the soybean market pop a little higher than many expected.  Where we go from here?  You know my answer, nobody knows.

If you read my column last week I was talking about China, which remains very important.  Economic growth rates might be down but food demand continues to grow.  Even with their changing domestic agricultural policies, they lack enough arable land to feed themselves.  That demand is real and ongoing.

What I find particularly interesting now are any acreage shifts in the US we might see now that we have had a major adjustment in prices since March 31st.  Will the US farmer plant 93.6 million corn acres as predicted by the USDA or will that acreage figure plummet with the big rise in soybean prices over the last month?  Will the 82.24 million soybean acres predicted by the USDA increase significantly into June 30th?  Or will Mother Nature come along and slap both acreage figures silly?

At first glance it would seem obvious to me that US crop acreage will change.  Depending on the weather going ahead and a major shift in acres one where the other will certainly add to the price volatility in the next several weeks.  Standing marketing orders will remain key.  It’s interesting; I had a market order hit for soybeans today, which I made six months ago.  Aim high, there’s nothing wrong with a market order, which seems in the stratosphere.

In Ontario the increase in soybean futures prices has been mitigated to some extent by the increase in the Canadian dollar since January 20th.  You can make an argument that cash prices now our only slightly higher for soybeans than they were on January 20th when the Canadian dollar was at $.68 US.  Corn prices are almost the same or even lower than they were on January 20th.  That is the foreign-exchange riddle Canadian farmers always have to juggle.  If commodities are coming back in a big way, that can only be good for the Canadian dollar.  I don’t have to tell you what happens next with Canadian cash grain prices.

The market of course is always right, but the truth of what is moving the market will remain elusive.  This past week on twitter many of my Argentinian followers were posting damage from their soybean fields.  I even had one follower who posted trying to combine soybeans while the water moved in waves across the field.  Some market observers are saying that the Argentinian crop will be cut 10 MMT by this recent wet weather.

Next week I hope to start planting corn.  I always surmise when that first corn seed goes into the ground, so much will change before I run through the same place with a combine.  There is so much that can happen between now and then.  Simply put, it means that risk management never gets old.  The last few weeks prove that again.  The next few weeks should be even more volatile as we all hit the auto steer button.  Work safe out there.  Keep your perspective realistic.  Let those standing orders do the marketing work for you.