The soybean balance sheet has been tight since USDA’s initial estimate in May. Price action ignored the forecast tight fundamentals, anticipating that demand, namely exports, would not live up to expectations. The recent anticipation of China purchases ignited gains, prompting us to advance soybean sales early last week as prices entered our sales target.
Now, going forward, our marketing strategy of selling strength will shift somewhat.
Agricultural commodities have seen notoriously one-sided trading patterns the past several years, both in higher- and lower-trending markets. “The trend is your friend” has held true, characterized by one directional trade that’s often been blamed on fund positioning. This has made it difficult to market crops. Rallies tend to overshoot to the upside, while selloffs, as seen in soybeans this year, take prices lower than what seems logical based on fundamentals.
Going forward, we plan to take a more proactive approach to our sales advice.
We will use options more often as part of our hedging strategy and will place stops under the market, allowing it to work higher before triggering sales, while placing targets in the weekly newsletter and in daily commentary. We will also use hedging strategies to lock in floors. These changes will allow for a more dynamic approach, adapting to the fast-paced environment that characterizes the marketplace today.