Soybean Market Snapshot
Supply concerns steaming from the floods in Southern Brazil have dissipated as clarity the production impact solidifies. Forecasted production puts the world balance sheet supplied solidly over the 5 year average suggesting continued falling prices post weather season. Non-commercial participants continue to increase thier short on pace to return to thier positions pre-Brazil floods. While by the end of August when growing uncertainty lessens the shorts may win out and any weather event will certainly cause some volatlity and a big enough concern could push those none commercials to close out positions again which translated to 50c rally back in May.
For producer looking to sell new crop your best ally in this market is time. Implied Volality isn’t super sexy but with prices above 1100 you can still get some juice looking 5-6 months forward. Given the outlook something with a guarenteed floor for a least half of committed volume is desireable. If there was flex volume available to leveage this would be the market to sell the upside on it and accumulate about 50c over todays market on the princible volume. Without any flex volume weekly collars, a bullet BAC or something else with a guarnteed floor but enough time value to give you particiaption is the best bet to safely enhance your margin.
In a similar scenario from 2018 when Non-Commericals were also very short, World and US Stocks to Use was comfortably above the 5 year average and realized volality was below 20% leveraged pricings with guarenteed floors consistently gave better than reference price end values. Unleveraged pricing, leveraging a range still offered pretty good value against the reference price and almost anything would have beat the the average pricing.
Given we are in the midst of the growing season there may be some upside opportunity to be captured either with waiting for a top or using some sort of leverage to pick up addtional value but one thing that seems to be clear is come early August it would be wise to have as much price coverage on as possible.
