Posted by: usset001 | March 6, 2013

A soybean inverse will also be resolved in the next six months

Old crop new crop cash soybean spreadLike corn, the “spot” price for soybeans is $2/bushel higher than new crop bids (Southwestern Minnesota prices). This is a strong inverse, similar to levels seen in 2003/04, and higher than the inverse seen in 1996/97 (two years of note for strong inverses).

I see two items of interest in this chart. First, in 1996/97 and in 2003/04, the inverse gained strength in the spring months – this offers some comfort to farmers who continue to store old crop soybeans. Second, when the inverse gives way in mid-summer, it gives way very quickly. In late July/early August of 1997, the inverse dropped nearly $1/bushel. But that’s nothing compared to the nearly $3/bushel drop in late July of 2004. In each case, it was the old crop price that collapsed down to new crop values and not vice-versa.

Every inverse is eventually resolved. If you are holding soybeans, don’t stay at the party too long.


Responses

  1. […] In March I blogged about an incredible inverse in the cash soybean market – nearby soybean prices were about $2.50/bu. higher than new crop bids for soybeans delivered in the fall. I saw some evidence that the inverse could continue strong into spring and it has; nearby soybean prices reached $3.50 premium to new crop in mid-May. Summer is looming and it is time to face facts – sometime over the next 90 days, this inverse (like the corn inverse) will be resolved, i.e. “nearby” and “new crop” will morph into one and trade at the same price. […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: