Turning down $10/bu. beans … that's the definition of “bullish.” And it's an attitude Trent Funk and others had as harvest reached the halfway mark during fall 2007, especially near river terminal markets and elevators close to them.

“We had a range of $9.90-10 cash at river terminals,” says Funk, who farms with his father, John, and brother-in-law, Aaron Thompson, at Elkville, IL, near the Mississippi and Ohio Rivers. “We're looking at $10 sales from here on out.”

That confidence in a steady double-digit bean market swelled with all of the positive news projected on soybean prices for 2008. It started even before USDA's October crop report, which showed soybean production at 2.6 billion bushels, down 19% from 2006. The world's shortage of wheat production and supply helped pull bean prices up steadily from low-$7 to $10.

Funk's “I-like-to-be-on-the-bull-side” approach has him monitoring Chicago Board of Trade soybean futures and options quotes and prices. “We pretty much forward sell and use few futures or options,” he notes. “But we follow closely where the markets are, especially at a time when they can change so drastically in a day.”

That focus on market trends led Funk to market nearly half of his soybeans before harvest.

“Most of our beans are Roundup Ready and about 20% are non-GMO,” he says. “We get about an 85¢/bu. premium for the non-GMO.”

Hindsight tells him his family shouldn't have sold a single bushel in light of the $10 prices seen late in the year. But most growers would agree that locking in $9 for half their soybeans is a can't-lose transaction.

That was Funk's attitude early in the year when he began contracting for an average price of $9.25. With the 85¢ premium, the non-GMOs averaged $10.10. “We sold 45% of our estimated production at those prices,” he says.

Most of those contracts enabled him to lock in a cash price and wait for a good basis. “Our basis improved in mid-October,” he says, noting that it was still at 50¢ under and would probably improve more in December and into 2008.

“We like the opportunities we see in getting $10 for our beans. There are too many factors that point to higher prices,” he says.

In its 2008 agricultural outlook report, Purdue University anticipated an 8% increase in soybean acres, up from about 63 million harvested acres for 2007. A carry in for 2007-2008 was pegged at 573 million bushels. But that will slip to 215 million for 2008-2009, says Chris Hurt, Purdue Extension economist.

After a projected 2008-2009 production of 3.13 billion bushels and use of 2.925 billion, Purdue projects ending stocks at about 208 million. The projected 2008-2009 price is $7.60-9.60.

Jim Hilker, economics professor at Michigan State University (MSU), says MSU's agricultural economics department “probabilistic price” forecasts for soybeans — drawn from market data — shows a strong chance for continued high price, as well as downside risk.

MSU's October forecasts indicated that for final March 2008 soybean futures price, there is a 10% chance it will be above $11.90 and a 10% chance the price will be below $7.88.

“This indicates that there is an 80% probability that the price will fall between these two prices,” says Hilker ($7.88 and $11.90). “There is a 50% chance the price will be less than or equal to $9.67.”

For July 2008 soybean futures, there is a 10% chance the price will be above $12.90 and 10% it will be below $7.26, putting the median price also at $9.67.

November 2008 soybean futures are forecast by MSU to see a 10% chance of prices hitting $12.29 or higher. “And there is a 10% chance that the price will be less than or equal to $6.76,” says Hilker. “That means there is an 80% probability that the price will fall between those two prices. There's a 50% chance the price will be less than, equal to or greater than $9.10.”

Hilker points out that the probabilistic price forecasts for soybeans, as well as corn, can be used by growers anywhere. “They are based off futures prices,” he says, “so growers can figure in their basis and determine a range of prices for their area.”

He adds that the probabilistic forecasts are developed similar to how crop insurance premiums are developed. “We use options premiums to help us determine the probability or odds of prices being in a range,” he says.

Farmers “truly understand odds, even if they don't think they can pass a class on statistics and probabilities,” he contends. “Farmers understand odds. They face odds every day. And, of course, odds are probabilities.”

With MSU's projections that soon, middle and late 2008 prices will likely range from $9.10 to $9.67, along with likely spikes up and down throughout the year due to continued volatility in the market. There should be good opportunities for Funk and other growers to secure a solid price to make soybeans as profitable or more profitable than growing corn.

The rule of thumb says soybean prices should be more than corn at a ratio of 2.5:1 to surpass the corn profit potential, indicating that $10 soybeans will be about equal to $4 corn in profit potential.

Funk sees that in his marketing program, which includes soybeans, corn, wheat and grain sorghum. With the continued demand for more soybeans, Funk believes it's nearly a sure thing that the market will be bidding-up soybean, wheat and corn acres. All of that is enough to keep Funk's bullish spirit strong for getting much of his 2007 beans sold at a hefty price in 2008.

Just under one-third of his soybeans are double-cropped behind wheat, says Funk. “We'll increase wheat acres by 15-20% in 2008,so we'll also increase wheat-bean acres by that much.”

Hilker says there will likely be some forward pricing opportunities for 2007 soybeans not yet marketed. “Prices are pretty good, so I wouldn't be unpriced for all of my 2007 soybeans,” he says. “I think prices will still be volatile. We have the whole South America growing season ahead of us, which can send the market whipping any direction at any time. There will be bidding for acres with corn. So, there are lots of upside opportunities, but also a lot of downside risk.”

Growers can examine the most up-to-date MSU probabilistic forecasts by going to www.msu.edu/user/hilker/soyfut.htm.

“I want farmers both on the upside and downside to have an understanding of risk they are taking,” says Hilker, adding that the Web site should help growers gain that understanding.