Soybean futures prices are $2 higher than they were last March 2nd. Of course I’ve been trying to figure out why? The May USDA report was released this past week with some very bullish numbers for soybeans. Of course, soybeans responded by gaining $.57 that day adding a sense of urgency to a marketing plan. I laughed when I noticed on twitter somebody was already talking about selling their beans too soon.
Of course, nobody really knows that. My standard answer to any specific commodity question is I don’t know. I always say that we have to weigh the marketing factors and try to sell your crop when you’re comfortable and profitable. The problem is many of us are not comfortable even though we might be profitable. Of course many of us are very uncomfortable maintaining our profitability. I think I put myself in that category. I love what I do, but in the spring it’s always a never-ending battle being ready enough when that crop is set to be planted.
For instance, take where I am now. I have all my corn planted but it is not out of the ground yet. Cold weather since planting has hindered its development. I would like to plant soybeans, but it is a bit early here in southwestern Ontario. Sometimes under adverse conditions, soybeans just quit and you have to replant. I’ve been there many times. Corn on the other hand is so much more resilient. Needless to say, I’m not always comfortable when I deal with these production realities. As a farmer I can do everything right and at the end of the day still be wrong. Depending on the vagaries of weather is not for the faint of heart.
$13 new crop soybeans were to be had this week in Ontario. Of course, I can remember guys contracting at $12 this year and yes I can remember people contracting for much less than that. I know that because people tell me, mostly on twitter but also in passing. Nobody is ever wrong, but we must keep in mind as farmers that uncertainty and volatility never go away. We rely on a commodity pricing system, which is extremely volatile and will remain so.
Generally, things work out over time. I’ve been writing this column for 30 years and been farming every one of those 30 years. I like to say I’ve seen almost everything. As a farmer, that gives me a bit a solace, but it also gives me a little bit of trepidation. The bottom line is, risk management never grows old. That can take many forms, whether that is a standing marketing order that hasn’t hit yet, or one that has or some other farm management practice, which is aiding your profitability.
Clearly though, the May USDA report was a bit of a turning point for our crop prices. As my friend and DTN senior grain analyst Darin Newsom said in his USDA review, the new crop soybean ending stocks projection of 305 million bushels jumped off the page. That was 120 million bushels less than the average trade guess and it further solidified the view that global demand is growing for soybeans.
That’s a nice thing to think about it, but what it also means is that as farmers we have to double back sometimes and check where we are. Agricultural commodity prices have been sideways for almost 18 months until the last six weeks when soybeans have taken off. It is true that corn and wheat are acting like they don’t care, completely encumbered by their bearish fundamentals. However, that won’t last forever either. With soybean prices clearly in flux now, the huge corn acreage number of 93.6 million in the United States will certainly change as well going into the June 30th USDA report.
We shall see. There is lots of price risk moving ahead toward the July 4 weekend. However, that is not the only risk. In my own case I have to find a window to plant my soybeans and hopefully that comes with another window for the corn already planted to see the light of day. Putting all that together with financial constraints is a huge challenge. If you ever tell some of your non-farm friends all the variables in the mix to make a profit, they might recoil. As I’ve said many times before, in the spring farmers throw thousands of dollars in the dirt and hope something will grow. Here we are.
Of course, I haven’t even mentioned the Canadian dollar. Yes, basis is basis in Canada. It is all such a moving target. There is corn and wheat everywhere, but not soybeans. Who knows the future? Not me, but I do know risk management never grows old. It’s our only way ahead.