Soybean prices have been on the rise for the past 6 months. Back on December 13th, 2020 I wrote a little clip called Jamie’s Top 5 most Important Commodities to Watch Going Into 2021. I called out Soybeans being one of the more interesting commodities to keep an eye on. Since that article soybeans have rallied another 35%. This rally was on the backs of strong demand fueled by soybean oil. The domestic soybean crush plants.
What’s going to fuel soybean prices in 2021?
As we turned the calendar and moved into March, all eyes were on the March planting intentions. USDA shocked much of the trade with a low number on soybean acres with a projection of 87.6 million acres. This puts the carryout numbers for the 2021 crop at a very tight level. This scenario will cause the price action to be very volatile and keep a high floor on the price levels.
The U.S. will need to have an ideal crop to keep the soybean pipeline full.
We have quite a few clients that raise Corn and Soybeans corn from North Central Iowa to East Central South Dakota. We have been watching this dry area since the end of last summer. North West Iowa and Southeast South Dakota have been dry for an extended period of time.
As we round off April and what should be our rainy season, we are in a poor position to take on the heat we need to raise a crop. A warm spring and summer are welcomed if we have adequate soil moisture like we have had the past few years, but this year is different. Outside of a few reports, most have been that they are planting into extremely dry dirt. See drought maps below.
Taking a look at the drought monitor map from this past Thursday you can see The Abnormally dry areas have grown considerably. This week compared to last week, the state of Iowa’s “Abnormally Dry” condition has grown by 30%. This leaves only about 25% of the state not affected by some sort of drought condition.
(Bloomberg) “More than 48% of the contiguous U.S. was gripped by some level of drought through April 27 and just over 68% was abnormally dry, according to the U.S. Drought Monitor. Drought is particularly dug in across the U.S. West, but it reaches through the Great Plains and into parts of Iowa, Illinois, Michigan, and even New England.
One reason for concern is that drought can be selfperpetuating. When land is dry, the sun’s energy is focused on heating the air instead of evaporating water. That raises temperatures, which leads to more dryness, which allows drought to spread even further”
It will be important to find yourself some good weather reports that you find useful to follow. When clearing through RJO’Brien I would recommend utilizing Randy Mittelstaedts “Weather Model Predicted Precipitation Est.” See below.
Charts are a good way to drill down entry and exit points. There are many different strategies traders use. Charts can be a popular one. Charts can make trading a little more defined because traders are able to put parameters on their risk tolerance based on support and resistance lines. Overall the soybean trend is pointed up on the daily, weekly, and monthly charts.
Many traders will add Daily moving averages, Bollinger bands, relative strength index, and many other tools that help enhance their trading experience. Many chart trading techniques can be found in our “Educational Material” section under the “Services” Tab.
We can provide different levels of trading techniques for beginner traders, traders that have some experience but would like to fine tune their strategy, and techniques that factor much more sophisticated mathematics and statistics.
If you are a grain producer and you are looking for some more hands-on consulting you can give us a call or go to paradigmgrain.com and set up a free 30 min call and we can help assess your needs.
“Trading commodity futures and options on futures involve substantial risk and may not be appropriate for everyone. Past performance may not necessarily be indicative of future results.”