USDA surprised the market on Monday with an increase in soybean yields, and that has changed the dynamics of the soybean market. Producers may need to adjust their marketing plans for the 2016 crop. Jim Bower, with Bower Trading in Lafayette, says the market is closely watching the soybean yield results coming out of IL, IN, and OH, “Especially out of IL where they had a very good growing season and early yield reports indicate a large crop.” Bower said Indiana is also seeing some good soybean yields.
With confirmation of a big U.S. crop, Bower says the market will quickly turn to focusing on demand, “The soybean market is a classic example of international demand driving prices. The market is testing some technical lows as harvest begins. But soon the shift will be to the demand side, and we are still seeing good demand with a good stocks to use ratio.” He feels there will be good long term demand growth for soybeans from China and other Asian markets, “The USDA continues to under estimate demand, especially from China.”
As for a strategy for the 2016 soybean crop, Bower is not a fan of buying calls, “From our experience, the track record on that is not very good.” He recommends a sell and defend strategy. Bower says the southern hemisphere remains the big question mark and will begin to be a major market factor in the next few weeks.