For the past 6 weeks, large commodity fund speculators have been short the soybean market. But this week, they decided to go long, and futures prices have rallied sharply. Pro Farmer editor Brian Grete said this change came out of nowhere, “The rally has gone on a lot longer than anyone anticipated and has been much greater than anyone anticipated. When you get into situations like this, it is hard to anticipate how much higher it will go.”
Steve Erdman, with EFG group in Chicago, said most of the rally is technically based but admits there are some fundamental reasons for higher soybean prices, “Argentina is getting rain as they harvest their soybean crop and that will reduce their production perhaps as much as 30%.” On Thursday, the Argentine government reported that the soybean crop would be down by 3.3MMT. In addition, Erdman says the rapid place of planting in the U.S. favors more corn and fewer soybean acres being planted.
This does represent a selling opportunity for producers says Mike Silver with Kokomo Grain, “Producers are seeing prices they had not expected to see for a long time.” The Dreyfus plant at Claypool has been paying over $10 cash for soybeans most of this week. New crop corn at many elevators closed Thursday at $3.74. Corn futures traded on Thursday above $4, but closed just below that level. Silver told HAT that U.S. soybean yields for 2016 will now be carefully watched as good U.S. production is needed to meet the world demand.