When it comes to describing markets, volatility is a word used perhaps too often by grain traders and consultants. Often times it is used when no clear explanation exists for the action of the overall market. However, one could argue that the past week was the perfect definition of volatile. The dictionary defines volatile as: a) likely to change in a very sudden or extreme way (Soybeans futures prices); b) having or showing extreme or sudden changes of emotion (Soybean basis); c) likely to become dangerous or out of control (Mother nature).
First, the week began with November soybeans marching higher, coming within just six cents of the $10.00 mark before turning tail and closing lower for the week. Second, soybean basis jumped higher for prompt shipment to ensure processing plants were able to bridge the gap to new crop and the impending rain delays. Monday started with some bean plants paying double-digit positive basis values to ensure supplies. By Wednesday, bids collapsed by 30 to 45 cents in a matter of hours. The plants got their fill and opted to wait. We also had a first hand look at Mother Nature’s dangerous, out of control side of volatility. Heavy rain fall put an abrupt end to early harvest progress and caused flooding of rivers, and low lying areas including low spots in many fields.
The bright beginning to the week was the excellent yield reports from local bean harvest. Early indications are that the bean crop is better than a year ago. While the market set back to end this week, extended wet weather could potentially reverse that trend as the market debates the impact of harvest delays on total production as well as quality. Conversely, if the weather turns warm and dry, as is currently forecasted, quality and quantity concerns will dissipate and focus will shift back to the demand side of the balance sheet.
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This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation. The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only. There is a risk of loss when trading commodity futures and options. CHS bases its recommendations solely on the judgment of CHS personnel.