November 17 – Soybean Prices Surge Ahead of the Holiday Rush

To think… next Friday, Holiday music will start flooding the elevators and restaurants around the U.S. But before Thanksgiving, farmers received a much-needed holiday gift in the form of higher soybean prices.

Grain prices (with the exception of oats) rallied across the board here in Chicago thanks to a stronger dollar and profit-taking from short sellers ahead of today’s Commitment of Traders report.

Here’s what you need to know about today’s trading session.

Soybean Prices Pop Double Digits

March soybean prices are back above $10.01 after an 18.25-cent gain on the day.

The front-month contract (November) added 18.5 cents and closed the day just above $9.90 per bushel.

What sparked the magic surge in soybean prices?

Multiple factors. The weak dollar, slow farm sales, bargain buying, short-covering, and of course weather reports across the Western Hemisphere. Across the Midwest, we saw local soybean prices kick higher along river terminals by as much as five cents.

Today, we saw a key, bullish report from abroad. The first called for the second corn crop in Mato Grosso to come in almost 19% lower than last year’s massive output.

Traders are speculating that drier weather across Argentina could affect crop conditions, while Brazilian planting progress is in line with the five-year average.

Jerry Welch argues that there is some seasonal tendency for soybean prices to increase from now until mid-December. [1]

These are the types of factors that we discussed in the wake of the October WASDE report, when front-month soybean prices had topped $10.00. If you’re marketing your soybeans right now, it’s a very good time to get them tested to understand the quality.

Then, rather than hoping on the phone to buyers who are likely going to be inudated with calls before the holiday, you can sign onto FarmLead and post your grain to hundreds of financially verified buyers who are looking to make a deal.

Corn Prices Rise Despite Expected Record Short

My friend Marc Lichtenfeld in Florida always signs off his emails to investors with the following line…

“Hoping your longs go up and your shorts go down…”

The shorts are what we’re watching today.

The Commitment of Traders report will arrive later this afternoon, and there’s plenty of speculation that we’re going to see managed money taking a record short position on corn prices.

It’s hard to argue against the sentiment given the fact that it’s getting harder to find any new bullish factor.

We witnessed some profit taking by some traders who benefited from the recent downturn in prices.

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With that in mind, we’re looking for corn prices to settle toward their seasonal lows and start to show some stronger gains soon as more farmers hold onto their grain in hopes of higher prices.

Today, the December contract added 6.5 cents to close the day at $3.43. The March contract added 6 cents and closed at $3.55 per bushel.

Wheat Prices Rebound

December Chicago SRW added 5.75 cents to finish the day a tick above $4.27.

In Kansas City, HRW price added 5 cents and hit $4.22.

Finally, December MGEX Spring Wheat contracts closed a tick above $6.35 after closing up 4.75 cents on the day.

While Russia has dominated market chatter over the first few weeks of November, we turned our focus today to quality concerns in Australia. This summer (their winter), there was constant talk about drought conditions.

Now, we’re reading reports that heavy rains are limiting the maturation process of the winter wheat crop.

As our friends at AgChieve explain in the chart below, MGEX December spring wheat prices are still holding below that key resistance line.

They also offered us a key lesson in trading vocabulary with the introduction of the “harami,” a reversal pattern that followed the early November price rally.

AgChieve

 

Is a Subsidy Cut on Tap?

Finally, we have to turn our attention to Washington, where the Senate is on the verge of voting on the largest tax reform effort in three decades. Farmers need to pay attention to any proposed changes to the tax code.

According to Bloomberg, the $1.5 trillion tax cut plan would trigger $25 billion in Medicare cuts and another $111 billion in cuts to other federal programs. While that doesn’t sound so bad on the surface, it could easily slash farm subsidies.

Enjoy the weekend.

About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.

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