On The Bean Bubble

[JimMeade]

Market analysts and various government and non-government reports tend to the conclusion that the price of soybeans is way too high for the fundamentals.  If that is true, we are in a bean bubble.

How do you trade a bean bubble?  Do you go long and ride it to the top, hoping to get out or reverse before it pops?

Do you stay out hoping to sell at the top?

Are you selling now, understanding that it might go higher but at least you will be on the right side of the trade eventually?

Or do you not believe in the bean bubble at all and are worrying more about selling to early on a market that will get even higher?

[BA Deere]

We probably are in a "bean bubble", assuming that corn isn't too cheap yet I`m going to do nothing on new crop.   I know this sounds unprofessional but this is why, I have a cocky neighbor that is always bearish and he pulled the trigger on his APH @ $9.69 new crop beans back in December, that was probably the high in these parts.  I can`t let him get ahead of me, the bid is now $9.35...I`m not taking it! I`ll ride this sucker down to 7 bucks before I sell for any less than $9.39.   If I could get close to $10, I`ll sell, which`d be about $10.70,  x17 assuming the 70¢ basis is still there, but I`d love to have a "10" in front of my first new crop sale just to rub his nose in it   🙂

[roarintiger1]

This is a good topic Jim.   Almost all of the market advisers have been killing this market for well more than a year now......and they have been wrong.    While I find it interesting and somewhat puzzling that the soybean price remains where it has been for quite some time with all the negative fundamental news, It's hard to see this bubble bursting with all the demand for soybeans that has been going on.

With that said, I think that when the bubble bursts, prices will skyrocket higher.....not lower.    This will take a hiccup in production somewhere, but it is a real possibility.    

I am not advocating buying beans or even storing every last bean you grow waiting for this to happen.  But I think that it is important to be prepared for the possibility of this happening.

The real question is how to be prepared for this and I do not have the answer.  Only to try to be as flexible as possible in your marketing approach.

[timetippingpt]

Roaring, we spend a lot of time discussing how to prepare to take advantage

of a spike in grain prices when they occur. The tools are out there you just

have to cultivate the relationships. Spent 2 hours on this at our website's

peer meeting last year at our farm. 

Critical component is to use tools that get the income into the right

tax year. Thus, futures are a very very small part of the plan.

[jec22]

Interesting pop in bean basis yesterday and now futures this morning. Had to know what number to believe anymore as to crop size and pipeline levels.  Not much DP being offered around here.

Time, I sure hope you are more successful educating farmers than the leaders in Iowa schools are.  Des Moines school are looking into starting high schools at a later start time so they are more alert. Now, though it was a few decades ago since I was in high school, if you would have told most they could come to school and hour or hour and half later, they would have just stayed up later the night before. They will still not be alert for the first classes.  I am struggling to see how that is preparing them for the soon entry into the world of a real job.  Don't think their employee is going to adjust their start time..........

[elcheapo]

I was at a meeting a couple of weeks ago....a big company big shot was there talking about the markets.

He was of the opinion, that the bean market is wide open....yes, there is a south American crop, but there will be weather

and condition problems.  Yes, we will plant more beans here this coming year.

but, when you look at projected demand, and use, we have carryover in the teen's........given those numbers, we should

be higher.  The other thing, this past year was just "amazing" (sorry for the use of a trump word).  wheat looked poor

at easter, and by harvest people were looking for another combine and truck to help get the crop in.

beans, same story, as an example, I looked over the soybean contest in the state.  Last year, a fellow, in what

we would consider a "dry" county, under no till....95 bu an acre !!!.......another entry in the same county, but

on "upland" the other was "bottom", it did 78 bu an acre !!!

just amazing !! (opps, I did it again).

if you look at the demand charts, it is in an upward trend...remember the definition, a higher high (oh the Colorado people love that).

japan wants' more beans....china wants more beans, although they are raising some now....we are using them at a record pace

for food and feed...perhaps even some biodiesel.. oh forgot...a developing story is, the south is going to cotton...due to $$$,

add in, a developing drought (possible).  the south can really produce beans.  the question, can the acres not planted to wheat

that have a chance of going to beans, can these acres equal those lost in the south...good good question.

they were the most optimistic on soybeans, then wheat, due to the massive reduction of acres, that we are selling some, was

using some in feed, until the corn squeezings got to cheep, and again, expected lower production, since last year was

soo amazing (shame on me).  the key will be, the HARVESTED acres, and the yield.......and a late cold event could

be the spark for the roman candle show.....I mentioned a few days ago, how some of the wheat around is "way to big and far along"...

we have forecasted weather in the 70's....the plants will start to break dormancy about 3 day after such good and continued weather.

consider, this is the first of march........we have had some hum dinger of winter storms in march .......

on the wheat........."wait for it".

corn......the advice was sell on rallys.  We have corn around, not huge supplies, but around.  The keys to the corn market is ethanol and

feed use.  we have huge (dang it, I just can't stop !) demand for ethanol...even south America.....some of south America use alot

of ethanol fuel, and they were importing....their answer was sugar cane years ago (before the oil companys got down there).

the other thing tho, many people will plant corn no matter what.....in the corn states.....some due to "rotation" ideas, some, just dont

know any better, others, if you can squeeze out 250 bu of corn, you don't make much per bu, but you have quite a few bu.

then, we have a weather question.......according to the data, we have a 25% chance of not having such a nice year.......but,

on the flip side, that give us a 75% chance of "average or better"....(you people that can understand taylor and dutcher, correct me

if i'm wrong).

the problem is, have we maxed out demand ?  yes, ethanol is in an upward pattern........but........if there is a trade problem...which

there are real concerns coming up.......his company, and another person from a "major world player", also voiced their concern, and

urged everyone to contact their congressperson to impart on them how "important" this was.....to the farmers....and them and their

votes for the next go round.

they also were concerned about the new epa person, and the renewable fuels standards.....which they viewed the current cabinet

as "unfriendly"

so........was I told right, or a buch of tweet ?

[JimMeade]

I got out of my Sep bean short today at a profit of 30 cents/bushel, not counting commissions and fees.

Now, do I reverse and go long, counting on seasonal patterns to raise prices?

So far, no.  So far I'm aside and thinking about it.  My main plan is to see if we get a rally and then sell it, maybe later in the spring and maybe in July.  That may mean I'm out for good if all the soybean numbers overtake us.  We'll see.

[sw363535]

Jim I am pretty much a chart guy and you took good advantage of the position.  But I don't know if you'll get a chance to improve the hedge.  Maybe a shot at 10.30

Problem is NC beans are not trading in an up trend as they were .  

We tested the 10.40 range NC in Dec and have failed to pass it on three attempts....one each month

We continue to make higher lows but we can't make higher highs.......

I tend to think of that as getting short on supply ... locally but not long term.....  

Corn on the other hand has been trending higher for 6 months .... on the futures in a steady slow way... 30+ cents... but is making new highs as well as higher lows.     Futures only

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basis gets in the way........but it is part of what will wipe out the middle man for much of the crop of the future.