Last Monday, the U.S. Department of Agriculture released its newest estimate for planted acreage and grain stockpiles, and both showed vastly more soybeans than had been anticipated. The supply in the United States was nearly 4 billion bushels on June 1, nearly 40 percent more than was in storage last year.
Meanwhile, in an effort to capture relatively high prices this year, farmers planted a record 84.8 million acres of beans, far above the USDA’s last estimate of 81.5 million acres.
Soy market swamped
As a result of the large supply and abundant rains helping the growing crop, soybean prices collapsed after the report, losing more than $1 per bushel during the week, with November beans trading Thursday for $11.34 per bushel before the start of the Independence Day holiday.
Alongside soybeans, corn and wheat lost value as well, with both markets dropping near six-month lows, with corn crumbling to $4.15 and wheat worth only $5.68 per bushel.
For some farmers who have already invested significant time and money into this year’s crops, these moves were crippling, but those who utilized hedging techniques like selling futures, making forward cash sales, or purchasing protective options were largely sheltered from the price drop. Meanwhile, end users of the grains, like livestock feeders, ethanol producers, or food manufacturers, all benefit from cheaper input costs.
Relief at pump soon?
As many Americans fuel up for the holiday weekend, high gas prices may be on their minds. Fortunately, there has been a recent drop in gasoline futures that could work its way to the price at the pump.