| CHICAGO, March 3
CHICAGO, March 3 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
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
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
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)