As the summer volatility in soybean prices has developed (see “Spring 2017 soybean prices: more upside than downside”), what is next for the soybean meal market?
New calendar year highs were set on July 10 of this year. Does a rallying meal market in July 2017 indicate any future direction for meal prices?
The years with significant upside from $335 December meal onto August-October were years where the weather scare developed into real weather issues and soybean yields below trend (2010, 2007 and 2012).
The accompanying chart presents the range in December soybean meal traded during August-October as a percentage of the July high. That percentage is applied to 2017’s June high of $313.70 to index the prior years to 2017. The current market for December meal near $335 is shown as the red dotted line. The years are sorted by the amount of the rally in July. The blue shaded area are years where meal rallied into July. Note that 2017 is the third highest year for prices since 1986.
Impact for soybean meal buyers
The fact that prices are higher on the right of the chart during August-October when prices rally into July makes sense. Firmer prices into the fall when meal is rallying in July makes sense because a July rally is usually weather related. The decline in 2008 was related to the financial crisis in the autumn of 2008.
The years with significant upside from $335 December meal onto August-October were years where the weather scare developed into real weather issues and soybean yields below trend (2010, 2007 and 2012).
The net of the analysis provides expectations for fall prices. A crop issue puts $375 in play, but only occurs 25 percent of the years where the market rallies into July. Assuming weather issues subside, $280 December meal is very likely.