Time For A Soybean Rally!

| August 26, 2013 | 0 Comments

soybeansGrain traders are in a tizzy…

Soybeans are surging $0.60 a bushel on weather related worries today.  This is a hefty 4.5% move that brings the September contract to $14.25 in mid-day trading.

What’s going on?

A looming late summer heat wave has the potential to bake crops in many parts of the Midwestern US.   As a result, investors are concerned the bumper soybean crop they were expecting just a few short weeks ago may not come to fruition.

According to multiple weather forecasting sources, a ridge of high pressure will advance into the Midwest early this week.  As a result, Iowa, Nebraska, South Dakota, Minnesota, North Dakota, and Wisconsin are expected to see a sweltering heat wave.

In fact, many forecasters are now predicting this could be the hottest Labor Day weekend on record for many parts of the Midwestern US.

And that’s just the start of it…

Recent crop tours reveal the US soybean crop isn’t living up to the hype from a few months ago.  As a matter of fact, disappointing pod count rates and delayed development has some analysts wondering if the USDA’s 42.6 bushel per acre yield estimate is unattainable.

All this newfound uncertainty has the potential to keep a bid under soybeans for the foreseeable future.

Let’s take a look at a chart…


As you can see, soybeans put in a new 52-week low at $12.71 a bushel in early August.  But ever since that low was set, prices have been creeping higher.  And this morning’s buying spree is pushing soybeans firmly above the old range bottom at $13.50 (blue line). 

With all this newfound crop uncertainty, it’s very likely the $13.50 support line will provide ample defense towards lower prices.

If all these weather worries actually present a problem come harvest time, you can bet prices will rise to $15.00 (red line)… or higher.

How can you capitalize on higher soybean prices?

One of the easiest ways is through the Teucrium Soybean Fund (SOYB).  SOYB is an exchange trade fund (ETF) that invests in three soybean contracts.  By averaging the three contracts, SOYB does a better job of countering the affects of backwardation and contango than other ETFs.

So keep an eye on soybeans as September arrives… 

With weather worries becoming more prevalent, there’s a very good chance of continued upside for this commodity.

Until Next Time,

Justin Bennett

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Category: Soybeans

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.