Why Isn't The Market Exploding At The Levels We Saw Last Year?

Jul 11, 2023


The USDA end-of-June acreage and stocks report excited the soybean bulls. The most notable number on the report was soybean acreage reported at 83.5 million bushels, down five percent from last year. On the grain stocks side of the report, 796 million bushels of beans are in storage, down eighteen percent from last June. The current drought monitor is looking friendly for the market despite the recent rains in the central corn belt.
 

The drought monitor looks a lot worse now than it did a month ago. Why isn’t the market exploding to the levels we saw last year?

The recent rain in the corn belt has kept some resistance in the soybean market. Even with a big drop in soybean acres, rain still makes grain. The demand side of the balance sheet looks sluggish with China and other buyers in the world market looking to South America for their needs.

The USDA published some bearish numbers in the June WASDE report including:
  • higher beginning stocks
  • lower crush
  • higher ending stocks
The market will be looking at the weather in depth over the next couple of months to determine where the price action will go.

What should I do with this information?
  1. Take a look at a profitability matrix with your grain marketing specialist to find a product that will fit your needs.
This is a sample profitability matrix built to show what profitability looks like for dryland soybeans.


 
At the projected yield, we are profitable at the current price. Another idea is to buy a floor in the market to be able to take advantage of an upswing in price if the drought worsens, but also being able to have a floor if the market goes the other direction.
  1. Market double crop soybeans
There is a lot of optimism in the country regarding double crop soybeans. Do you have a plan in place to manage profitability with the market rally?
  1. Look forward to 2024
If 94 million acres of corn are planted this year what will next year’s soybean numbers look like?
Will the heavier corn acre areas be heavy soybeans next year with their rotation?

A rally in the 2023 market gives great opportunity to discuss marketing 2024 soybeans. If the trend continues in South America, they will have another record yield coming in next year. The 2024 soybean market is around 12.40, well above historical average pricing. Be sure to talk with your grain marketing specialist to discuss opportunities in the 2024 soybean market.

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