The last USDA Supply-Demand Report projects U.S. ending stocks to drop to just 120 million bushels This would be the tightest U.S. ending stocks number since 1997 when soybean prices advanced to more than $9/bu. This very tight stock situation has created an inverted market in which cash bids are higher than delivery 30 days from now and the September bid is likely to be a lot higher than delivery in October or November.

The September soybean chart shows a major low in early January at $5.18. From that low, prices rallied up $1.02/bu. to the May 20 high at $6.20. Improved weather dropped prices to an early June low of $5.78.

The long-term chart action shows a series of higher highs and higher lows — the key price levels to watch are $5.78 and $6.20. A close below $5.78 would confirm that a major high is in and will likely result in a drop to the $5.40-5.50 level or lower into harvest.

A close above $6.20 would suggest a test of the $6.50 high on the continuation chart. With low ending stocks and constantly changing weather forecasts the only certainty is for very volatile prices this August.

Alan Kluis is executive vice president of Northstar Commodity Investment Co. If you have marketing questions or want more information, write: Northstar, 1000 Piper Jaffray Plaza, 444 Cedar St., St. Paul, MN 55101; call: 800-345-7692 or e-mail: aginvestor@agmotion.com.

What To Watch For:

Watch the chart action to see if the $5.78 level holds or prices can rally above $6.20 in the September CBOT soybean futures contract.

Watch basis levels at export terminals and at soybean processors. If basis levels improve it's a positive signal. If basis levels widen it's a negative signal for both old- and new-crop price outlooks.

Exports have been strong and need to stay above last year's level on a week-to-week basis to show continued strong demand for U.S. soybeans.

What To Do:

Keep offers in place to get new-crop hedges on part of your crop as prices rally or if futures close below critical support levels.

Stay aware of your relative price level. With cash and new-crop bids 50¢ or more above loan you have risk if you're not making some incremental sales. If prices drop lower — down close to or below your county loan — be ready to use the Loan Deficiency Payment program to add to your income.

If you have new-crop soybeans that will be ready for harvest in September, check your bids for delivery looking at bids for the first half of September, last half of September, October and November. Odds are you'll see why you will want to deliver soybeans that you combine in September.

Check different terminals and processors you can sell to. Cash bids may vary by as much as 20¢/bu. on the same day depending on export and processor demand, and when you can guarantee delivery.

With little or no carry in the soybean market, odds are you'll want to use your storage for corn and get soybeans hauled to elevator storage with November 2003 trading within 2¢ of May 2004 soybeans. Why store?