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Soybeans are an
annually produced crop. Planted in the spring and harvested in the
fall. Planting, pollination, and harvest are all times of great risk
for the Soybean crop. As such, the marketplace builds a “risk premium”
into prices due to the uncertainty of future supply.
This is readily seen
by the fact that in the 3 months prior to planting (Feb/Mar/Apr), the month
prior to pollination (Jun), and the harvest months (Oct/Nov) Soybean futures
have gained a total of 985 ˝ cents per bushel. The other six months of
the year, Soybean futures have lost -853 ˝ cents per bushel in total since
January 1987.
* Past performance is not
necessarily indicative of future results. See disclaimer below for further
details.
Planting is the
foundation of all crops. In anticipation of all that can go wrong during
planting – too little or too much rain, or temperature extremes – the
marketplace prices in future supply uncertainties through rising prices. In
13 of the last 19 years (and 4 of the last 5), July Soybean futures have
rallied from February through May effectively pricing in crop development
problems. In fact, the February through May high has exceeded the January
settlement in 15 of the last 19 years by 30 cents/bushel or more since 1987.
It is not uncommon for Soybean futures
to set their high price in May or June, after the crop is fully sewn. With
Soybeans pollinating in July, it is not surprising that as future supply
becomes more known, that July is the worst month on record. Prices tend to
fall, with August rallies fairly common after extreme July weakness, into
harvest. Post harvest, Soybeans tend to rally as supply is not readily
available in the U.S. and South America is starting to plant. For the
remainder of the year, prices drift lower as the cycle begins anew. |
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