Chicago | Reuters –– U.S. farmers booked soybean sales this week as prospects for burgeoning global supplies and weak export demand caused growers to accept deals they’d rejected at similar price levels just a few weeks ago.
Grain dealers noted an uptick in grower interest as Chicago Board of Trade soybean futures rallied 3.8 per cent this week, hitting their highest since Oct. 22. The soybean basis also was in line with late-October bids at processors and elevators across the U.S. Midwest, raising cash prices back to harvest levels.
As the calendar nears 2016, growers need money to start making payments for fertilizer, chemicals and seeds they will need for planting in the spring.
“As a farmer, you have got bills to pay,” said Garry Niemeyer, an Illinois farmer. “You are getting near the end of the year and all of a sudden you have to make some decisions about what you are going to do next year. You have to have the cash flow. You never know how long a rally is going to last.”
Most sales booked this week were for small amounts, dealers said. Farmers were holding back the majority of the crops they have kept locked in storage bins since harvest.
“It is more like a steady trickle than a constant flow, let alone a flood,” brokerage INTL FCStone said in a note to clients.
But worries that the massive harvest reaped by many farmers in the fall will act as an anchor on the markets throughout the winter convinced some to part with crops at prices below the targets they set a few months ago.
Other bearish factors hanging over the market also contributed to growers’ decisions. Since October, the dollar has rallied to 12-1/2 year highs, weakening the prospects for U.S. exports.
The pace of soybean exports has fallen 17 per cent below last year’s, according to U.S. Agriculture Department data. That is slower than the government’s forecast for a seven per cent decline in the 2015-16 marketing year.
Additionally, good weather for much of the planting season in South America has raised expectations for soybean production there.
“I think they probably realize that they are not going to see the levels that they are holding out for,” said a dealer in Council Bluffs, Iowa.
— Mark Weinraub is a Reuters correspondent covering the grain sector from Chicago. Additional reporting for Reuters by Karl Plume.