Soybean Study
A quick search of synonyms for“ likely” returns the words probable, possible, plausible, imaginable and so on. To summarize, it was safe to say the USDA’ s Prospective Plantings guesses may or may not happen, a reality that doesn’ t provide much clarity.
Think of it this way: The folks who religiously followed any and all USDA imaginary numbers brought to mind a couple famous quotes:
First, from Karl Marx,“ Religion is the opium of the masses.” The second comes from Ralph Waldo Emerson,“ A foolish consistency is the hobgoblin of little minds.” The reality is, as usual, the market tells us what we need to know.
By studying the November soybean / December corn futures spread we could read what the market was signaling about its needs for spring planting. I tracked this spread for six months, from the first weekly close of September through the last weekly close of February, plotting weekly closes and calculating averages.
Over the previous 10 years, the spread had shown an average weekly close of 2.4( November soybeans priced 2.4 times more than December corn). Theoretically, then, it could be assumed if the current year’ s spread was running above that average then it indicated the U. S. was looking for more planted soybean acres( the 2024 spread had an average weekly close of 2.46).
If running below, then the corn market was trying to buy planted areas away from soybeans( the 2023 spread had an average weekly close of 2.26). Through the first 20 weeks( out of 26) of the 2024-25 tracking period the 2025 futures spread showed an average weekly close of 2.33 meaning the market: a) wanted more corn acres planted, or b) wanted fewer soybean acres planted.
As winter eventually turns to spring, U. S. producers had to deal with the same set of factors as always: weather, production from competitors and trade policy just to name a few.
The reality was that it didn’ t matter what U. S. producers wound up planting. What mattered was how traders positioned themselves in the markets. As for Groundhog Day, one thing remained:“ Okay campers, rise and shine, and don’ t forget your booties‘ cause it’ s cold out there....”
About the Author
Darin Newsom has been working with markets in general for nearly 40 years, dating back to Black Monday 1987. Over that time, he has worked in local grain elevators, first dumping trucks then as a merchandiser, before becoming a commodity broker and advisor. That eventually led him to DTN where he spent 15 years as the company’ s senior market analyst before going out on his own with Darin Newsom Analysis, Inc.
These days, he also has the title of Senior Analyst for Barchart. Along the way, he has developed his own way of analyzing markets in every sector, always proudly reminding people that he is not an economist.
February 2025 | www. FarmersHotLine. com | 27