Beans are a lay-up for $7.50 if the rest of the growing season is normal
For the past 14 months the Factor Service has been a voice in the wilderness warning farmers that US Soybeans prices were head to the mid $7.00 range.
I have based this forecast on a single chart — a proxy chart constructed from only the Soybean 2015 Crop Year futures contracts — starting with the Nov 2014 contract, then rolling forward.
The 2015 Crop Year chart projected prices to $8.50 when, in July 2014, a 42-month H&S top was completed. The markets has not yet reached $8.50 — but Soybean traders know that “short crops have long tails.” Long tails to not last forever. The market has held at the $9.00 level, but in the process an even lower price target has emerged from the 2015 Crop Year chart. The weekly price graph has now constructed an 11-month descending triangle pattern with a lower boundary at around the $9.00 level. This $9.00 level provided support in Oct 2014 and Jun 2015. Prices are at this level again — and in my opinion, it is inevitable that the $9.00 will give way. Big time! The longer-term target for nearby Soybeans is $7.50.
I know what all you farmers are going to say.
- “I cannot make money at $7.50″
- “I just bought a new F250 truck and a $1 million GPS-guided harvester”
Do you think the market cares what payments you have coming due?
Raw material commodity markets are in a general free fall. Consider some of the charts below—for Crude Oil, Cotton, Sugar, Silver and Soybean Oil :
All ships fall together in the tide of depreciating raw material prices. My concern for farmers is not that Beans are going to $7.50, but that Beans will go to $7.50 and remain under $9 for several years.
Consider that from March 1968 through September 2007 (a period of 486 months) the price of Beans closed above $9 in only 10 of those months — for you math whizzes out there, that amounts to only one out of every 48 months, or one month every four years. By contrast, the price of Beans has remained above $9 ever since September 2007.
Million dollar harvesters do not guarantee $9. Assuming normal weather for the rest of the crop year — welcome to a new world of sub-$9 Soybeans. I hope I am wrong.