Outlook for 2015

Grain Merchandiser, Travis Magoon, wanted to be sure to share with you this insightful article from AgWeb. The original article may be found here.

2015 Outlook: Use Early Sales Strategies for Unpriced Soybeans

By Ed Clark
Top Producer
Business and Issues Editor

Editor's note: This is one of eight 2015 marketing outlooks, the editors are providing to help you succeed and be profitable in the coming year. Please check back each Monday for another outlook.

Soybean demand is robust and firmly in the bullish camp but the highest soybean supplies in history is outpacing them. So for the first time in years, the price outlook calls for red ink for soybean producers who haven’t pre-sold. Still, old-crop prices have held relatively tough, more than $1 higher than October’s lows.

The outlook for the next few months is less buoyant, even with last week’s brisk export sales. Central Iowa cash soybean price quotes on Dec. 12 were running around $9.90 for old crop but less than $9.50 for 2015 soybeans. That’s more than $1 to $1.50 per bu. less than breakeven costs calculated by Iowa State University.

Because of significant downside risk, some analysts suggest early pricing of 2014 soybeans, and even 2015.

“Soybeans will respond quickly to a weather concern or political issue,” says Frayne Olson, ag economist at North Dakota State University. Should these occur and it’s rally time for soybeans, book some sales, he suggests.

“With a good South American crop, take $1 off today’s futures to $9 per bu., and with good crops—following record plantings—in both South America and the U.S., 2015 soybean futures could drop as low as $8,” Olson says. “That would put cash prices near $7.50. That is worst case, but it illustrates the downside risk.”

However, Olson says that most likely, soybeans will trade in the $9.50 to $10.50 range into January. Any number of factors could impact prices, including major USDA reports this winter, Brazil’s weather, a possible slowdown in global economic growth and questions about China’s economy. All this uncertainty indicates to Olson that producers may see two pricing windows between now and spring, beginning late January.

This winter, all eyes will be on Brazil. Rabobank looks for farmers there to plant 5.5% more soybeans than last year and a continued buildup of stocks. Rabobank says that global stocks-to-use is poised to reach an all-time record of 31% by September 2015, a steep increase. Some think it could be even higher.

“Our export sales are huge but they are likely to slow down considerably,” says Darrel Good, University of Illinois ag economist. But lately, “China has been buying the heck out of soybeans.” Rabobank is predicting that China’s soybean crush will increase 6% in 2015, the same as the past two years.

Good looks for soybeans to edge lower from today’s values, with July futures likely to trade in the $9.50 to $9.75 per bu. range in the first quarter of 2015. He views that period as a pricing opportunity. “Sell beans earlier than corn,” he advises.

Chad Hart, ag economist at Iowa State University, is looking for a gradual decline in soybean prices moving forward. His trading range from now to spring is $9.50 to $10 for old-crop soybean futures, but closer to $9 for 2015 soybeans. “I recommend holding off a while on marketing 2015,” Hart says. “We’re still seven months away from planting. A whole lot can change.” Such as the annual corn/soybean acreage battle.

One positive for soybean exports is that unlike corn, U.S. soybean exports will not likely be impacted by the strongest U.S. dollar in years, Hart says. “China has a fixed exchange rate,” he explains. As a result, China is not facing higher soybean costs due to the dollar’s strength.

As much as two-thirds of 2014 soybeans are unpriced, says Dave Fogel, vice president, Advance Trading. But economics don’t favor holding soybeans with only a 17-cent carry from now to July, well below storage costs, he says. Because of this and significant downside price risk, he suggests selling beans and re-owning it with call options for upside protection. Cost for a soybean put with an $11 strike price was in the 30- to 35-cent-per-bu. range last week. For new-crop soybeans once 2014 is sold, he suggests downside protection with put options.


Looking Ahead to Fall Harvest

The weather does not seem to be working with us to push this crop along, so as far as I can see corn maybe pushed into late October. With the markets as low as they are now and LP at the price it is, it might be better to let your corn stand longer to dropping, not only for moisture but picking up test weight.

As far as the market goes, I believe that we will not see a big upswing in the market until after the New Year when the final numbers on yield are released. That being said, we are looking forward to working with everyone to the best of our ability on getting you the best dollar for your grain. It is going to be an up and down road for a few months, but I think there is light at the end of the tunnel. "Why?" you might ask? Well, with the drought in South America the corn exports should see a good upswing this winter. With that you should see the price going up, but "How far?" is the million dollar question. Some think we will see $4.50 to $4.75 Chicago market. So it will really depend on what our local basis is to have hopes that we can get close to the $4.00 mark.  

As far as what is going on at the elevator we are going into harvest in close to the same shape we did last harvest. We are all set and ready to take this fall harvest on and look forward to seeing you all throughout the fall. So let’s all work safe and have a good harvest. 

Travis Magoon
Grain Merchandiser


Planting Season Approaches

Well, planting season is coming upon us fast. Here are some things to think about as you get ready for the start of a new crop year...

The experts feel the market will take a good hit after the March 31st prospective planting and grain stocks report is released. The report is at 11am that day; I would keep in mind to watch the markets very close at this point so you don’t possibly miss out on what could be our best prices for the upcoming crop. From what I hear and see the new crop beans could be the market that gets hit the hardest. Will it rebound if this happens? Good question, it would take a weather scare or something to happen with South America’s crop in the near future. 

Of course, the price could change even more as summer passes by. We all know how it works: a dry and hot summer can raise the prices and great growing conditions can certainly drag the market right to the bottom. At this point I am just encouraging you to look at your new crop marketing plans and try not to wait for that real high dollar mark.

We also want to remind you to be safe this spring!

Thank you,
Travis Magoon, Grain Department