The current support seen in soybean futures prices is an indication that farmers will plant more soybean acres and fewer corn acres for 2014, says Bob Maurer, market analyst and co-founder of Manduca Trading LLC in Chicago.
“I think soybean acres will be higher,” Maurer says. “Soybean prices have had a good uptake and much of it is based on China demand. Their pork industry is trying to meet a tremendous appetite (from its consumers). Crush margins are great for them to go ahead and buy soybeans.
“That is helping rally soybean prices. I don’t think it will go away any time soon. I think mathematically, soybeans make better sense.”
January 2014 soybean futures have rallied from a slippage point of $12.60 per bushel in early November to above $13.45 a week ago and near $13.20 on Friday.
March, May and July contracts were all above $12.80. August was about $12.50. The big decrease starts at new-crop September near $12, and November pushing $11.50. The November hasn’t been above $12 since September, an indication that supplies will increase through more acres and potential South American production.
Farm Futures, our sister publication, points out that export sales are expected to run almost 40 million bushels, “a strong number most years, but down from some of the big totals seen this fall.”
Also, traders expect USDA to chop about 20 million bushels off carryout in its supply and demand report on Tuesday. That’s due to the strong demand from China. Farm Futures pegs ending stocks at 150 million bushels, compared to 170 million last month.
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Steve Johnson, Iowa State University farm management specialist, notes that farmers who stored a large portion of their beans may be reluctant to move them because of large 2013 income tax liabilities. “However, income from cash sales can be deferred until January if merchandisers are notified in advance of the transaction,” he says. “Make sure you’re working with a reputable buyer, as you’re an unsecured creditor of those cash bushels sold until payment is received.”
Johnson says the rally in the nearby January soybean futures, along with the attractive basis, are incentives for farmers to sell cash soybeans. “The first step is to recognize the cost of storing soybeans and when cash will be needed to pay debts and generate funds for 2014,” he says.
“A farmer may want to re-own the cash soybeans sold via a call option strategy, which can be provided by most grain merchandisers and called a minimum price contract. Use of the March contract for the call option provides at least three months for futures prices to rally before the March soybean option expires approximately Feb. 21, 2014.”