Commodity Trading:
Soybean Futures
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Considerations
Soybeans
show a very similar pattern of building and destroying of the crop’s
“risk premium” as Corn. They also are grown in predominantly the same area of the
country as Corn. At the onset
of the calendar year, the Soybean crop, too, must deal with tax- related
selling, as well as transportation problems.
Soybean farmers have a vested interest in postponing their
marketing into the New Year for tax purposes, but typically at the
beginning of the year they must begin to transform their supply into cash
to finance the impending planting effort.
Couple this selling with the likelihood that interior waterways
(the primary and cheapest way to transport grains) are frozen at this time
of year. Grain elevators, the
middlemen who buy grain from farmers and store it for later sale to
consumers, tend to lower their bids for grain during the winter to protect
their profit margins as the frozen waterways increase their transportation
costs. These forces tend to
reach a crescendo in early February, just before field preparation for
planting and the rivers begin to thaw.
Soybeans tend to bottom a little ahead of the other grains, as the
South American Soybean crop is approaching pollination during January and
February and, therefore, is very susceptible to damage.
World
Production of Soybeans in 1998
|
|
1,000
Metric Tones
|
| Argentina |
18,000
|
| Bolivia |
900
|
| Brazil |
30,900
|
| Canada |
2,737
|
| China |
13,908
|
| India |
5,700
|
| Indonesia |
1,306
|
| Mexico |
132
|
| Paraguay |
3,304
|
| Thailand |
376
|
| States |
73,900
|
| USSR |
350
|
| World
Total |
155,988
|
Worries
about the South American crop development, as well as potential planting
delay fears, grip the Soybean market and cause prices to bottom in early
February. The bulk of the
Soybean planting in the United States is started by May 10th
with planting usually completed by June 23rd.
Ideally, planting should be done during mild temperatures with
moderate precipitation, so the ground is soft and easily manipulated, but
firm enough to support the heavy farming equipment.
If the temperature is too hot/cold and too much/little
precipitation is present, then Soybean planting can be delayed.
Late planted crops or replanted crops tend to produce lower yields.
Planting delays have been a frequent problem over the years and,
therefore, the marketplace is usually justified in building a risk premium
this time of year.
Usual
Planting Dates for Soybeans
(Top 5 producing States)
| State |
Begin
|
Most
Active
|
End
|
| Illinois |
May
6 |
May
15 - Jun 9 |
Jun
16 |
| Iowa |
May
4 |
May
14 - Jun 2 |
Jun
17 |
| Minnesota |
May
6 |
May
16 - Jun 3 |
Jun
23 |
| Indiana |
May
5 |
May
15 - Jun 5 |
Jun
20 |
| Ohio |
May
5 |
May
10 - Jun 7 |
Jun
23 |
Dates
based on the December 1997 USDA Agricultural Statistics
Board Usual Planting and Harvesting Dates report
Several
days after planting, the Soybean plant begins to emerge from the ground.
Though the Soybean plant is considered one of the most drought and
foul weather resistant of the crops grown, until its extensive root system
develops, the Soybean plant is very vulnerable. The Soybean plant is
periodic in nature, so maturity can be tracked on a calendar with accuracy
of a few days for each stage of development.
After several weeks, the Soybean plant begins to form buds, which
will eventually bloom, setting the stage for pollination.
USDA/NASS
Crop Progress Timetables
Soybeans
are considered to have bloomed as soon as one bloom appears on the plant
and will end up with several blooms.
The blooming/pollination process is the most critical stage of
development of the Soybean crop. Good pollination almost assures a strong plant and good
yields. Soybeans usually
pollinate in the second or third week of July.
After pollination, the plant begins to form bean pods, which are
roughly 1 to 2 inches long and contain 4 to 6 beans.
Once the Soybean plant has pollinated, it has developed a vast root
system and is almost impervious to most weather conditions (with the
exception of a frost) and, therefore, the crop is “made”. The blooming phase of development typically lasts from the
beginning to the end of August, with pollination occurring roughly a third
of the way through the process.
The
Soybean plant is considered to be setting pods when pods are developing on
the lower nodes with some blooming still occurring on the upper nodes.
Because Soybeans have such a vast root system, the Soybean plant is
able to continue to grow in height, often reaching 72 inches before the
pods are fully developed and the plant begins to deteriorate.
Normally, during this stage of development, which lasts from late
July through late September, prices drop precipitously, as risk of damage
to the crop is minimal.
As
the pods develop fully, the lower leaves begin to die as nutrients are
used for pod development. Soybeans
are considered to be dropping leaves when the leaves near the bottom are
yellow and dropping. Leaves
near the top may still be green, but 30% to 50% are yellow.
Leaves typically drop from late August through early October.
At the later stages of leaf dropping, the plant is susceptible to
freezes, which can split the pods and damage the crop.
The
Soybean harvest usually begins by September 21st, with the most
active period being October 1st through October 25th.
The Soybean harvest is normally completed by November 10th.
Ideal climatic conditions for harvest of the Soybean crop are
moderate to slightly above freezing temperatures with little
precipitation. Warm and wet
weather can make fieldwork messy, while early, heavy snowfall or severe
rains can make harvest next to impossible.
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