CHICAGO, March 3 (Reuters) - Recent strength in soybean futures offers a ray of hope for U.S. farmers looking to eke out profits on their yet-to-be planted 2017 crop, even with storage bins bursting around the country and expectations for supplies to grow even more.
An analysis of price moves in five years that have followed a bumper harvest and a massive boost to the supply base shows that a rally early in the year signals that the soybean market will remain strong until farmers begin harvesting in the fall.
Corn is a riskier proposition, as early rallies in new-crop futures, which track the crop that will be harvested in the fall, have fizzled two of three times following a comparable supply boost.
Three straight years of declines in U.S. farm income have sent the agricultural economy reeling. The price achieved for crops planted in the spring could determine whether growers can meet loan obligations at the end of the year.
So far this year, the Chicago Board of Trade November soybean futures contract is up 3.2 percent while CBOT December corn is up 5.0 percent.
The rally has come despite U.S. Department of Agriculture forecasts that soybean ending stocks will be the biggest in a decade and expectations for a record harvest in South America that will add to the supply glut.
Many farmers, who tend to get bulled up when prices rise and are often reluctant to make sales during a rally, are not taking any chances this year. Grain dealers have said that farmers are anxious to lock in profits on the soybean crop they have yet to plant.
Rodney Frick, who farms in western Illinois, already has booked contracts with grain merchants to sell 80 percent of his expected soybean production, forgoing a chance to boost revenue further by gambling that prices will continue to rise.
"I normally tend to wait a little while, but I know what my costs of production are," Frick said. "I am happy where I am at this point."
New-crop soybean futures posted winter rallies in 2007 and 2016, years that also followed robust production and a big build-up in domestic stocks. In those years, new-crop soybean futures averaged a gain of 14.5 percent by the time the next crop year started on Sept. 1, with the market peaking during June and July.
For corn, the market declined in each of the last four years that followed a bumper harvest. New-crop prices dropped an average of 11.9 percent between the start of January and the end of August in 2010, 2014, 2015 and 2016.
But corn has reached higher market peaks, even in the down years, than soybeans. In the five years following the biggest supply bumps, corn prices have topped out at an average of 21.1 percent above their starting point in January.
The high point for new-crop soybean futures was an average of 14.1 percent higher than the January start. (Reporting by Mark Weinraub; Editing by Leslie Adler)