CHAMPAIGN, Ill. (WCIA) — The soybean market has climbed from a shorter supply and stronger demand, but should farmers sell or ride the market higher?
In Thursday’s From the Farm report for the WCIA Morning Show, Ag Reporter Stu Ellis explores how farmers should manage risks in the soybean market.
Commodity analyst Darren Dohme of Powerline Group in Champaign says there’s been a “perfect storm” that has driven the soybean market higher.
“The big driving force has been our exports,” Dohme says. “China has become a very big surprise since August.
“Of, course the tighter supplies here in the U.S. with the smaller crop and then China sneaking in and doing a lot of buying demand and we have been having some dry weather in South America has helped drive this price lately.”
But market acceleration has slowed.
“We come back from Thanksgiving and we are getting a little wetter forecast in South America, so things are starting to change a little bit,” the analysts says, “and then there were some rumors that came out last week that China’s crushing plants were starting to lose a little bit of money and maybe shifting some of that demands towards canola oil, rather than soybean oil.
“So that has taken a little bit of the aggressive buying away from the soybean market.”
Ellis asks Dohme whether should farmers let go of their unsold soybean crop.
“The soybean market is inverted meaning that the price action is higher for the nearby than it is out for the deferred. That’s telling you that the market is calling for the beans now,” Dohme says. “Really a farmer shouldn’t be storing them. And if he wants to go ahead and sell those beans, and he should sell those beans, then he can always replace his ownership with a call option or something cheap to replace that ownership at this time.
“Now the bean market itself looks like it has topped out itself for the near term. And it looks like these January beans could drop back to the $10.75 area.”
Dohme says that he thinks we’ve shifted upward to a higher trading range.