A culmination of events are bringing bearish confidence to the soybean market.
The outlook seems grim, but provides a couple marketing opportunities.
Tomorrow (October 31) marks the first notice day for November soybeans. Producers wanting to make cash sales will look to the January contract. Zaner Ag Hedge market strategist Brian Grossman discusses forward contracting in July compared to making cash sales in January.
“That is currently trading at a 39 ½ cent carry versus January. Right now, that carry is up there and knocking on full carry,” Grossman said.
Grossman believes the January/July carry is at a 10-year low, if not greater. He shares why the carry is “extreme” compared to what we have been seeing.
“Making that next contract low shows what level of confidence the market has in our current supply and demand situation. “In this case confidence is not a good thing because they are comfortable with the supplies they have and are willing to pay that carry in the market for guys to put their soybeans in a bin and sell them or forward contract at a later day,” Grossman said.
Grossman says the lack of confidence in soybeans is largely due to an expected record harvest in South America, more specifically Brazil.
“Obviously, China is not involved in our exports right now. With the South American crop at a record pace, there’s some talk that they may be having deliverable soybeans as early as late January and early February. That is more ‘bad confidence’ for the market because there is less concern out there,” Grossman said.
Grossman says he remains “very bearish” about soybeans, and encourages producers to either take advantage of the January/July carry or a potential rally.
“That carry doesn’t necessarily mean it will be there in July. If you want to capture that carry, you need to be taking advantage of it today,” Grossman said. “Anybody that is concerned about their storagability for soybeans next year or right on the edge of make or break it when it comes to a profit margin should be quick to take advantage of any rallies that get us into a profitable price.”