Buy a “ton” when soybean prices are low.

By Evan Disher

By now, it’s likely that you’re feeling pretty comfortable with the prices you’ve been experiencing for soybean meal, especially this year. After all, the market low has been hovering near decade-low levels below $300-per-ton since 2016. Furthermore, the trading range has been relatively tight this year at $45, relative to the previous three years.

FrontMonthPrices

Front Month Prices

The big question, then, is this: What are you doing about this low-price opportunity? Are you buying ahead and locking in these historically low prices?  Or are you going to take a chance on even lower prices that could change to higher prices?

Buy when prices are historically advantageous

While this year has historically been a good price for bean meal, dairy producers shouldn’t grow complacent and believe these cost-per-ton levels will hold. Based on the history of the market, at some point it’s inevitable that a catalyst will hit, and prices will move higher.

Take the recent Phase One trade deal, for example. If it creates a strong export demand, there is an increased likelihood that a soybean complex rally will occur. Consider that there is also South American soybean harvest underway, and the U.S. is gearing up for the planting season, and it adds up. That’s why it is probably a good idea to be prepared and protect your risk.

If the markets do rally, you’ll feel a lot better if you’ve proactively protected your prices ahead of the move. Being proactive will help you keep wide margins by protecting feed prices. Having volatility in the market provides great opportunities to take advantage of market dips. Be sure to contact your local supplier for quotes and to develop a plan. If issues arise trying to book the feed in the cash market, using call options or futures in a hedge account is another great way to manage your price risk.

 

© 2020 Total Farm Marketing, a service of Stewart-Peterson Group Inc.  Futures and options trading is not for everyone.  The risk of loss in trading is substantial.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing.

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