What are you doing about all the beans you’re storing?

decrease font size  Resize text   increase font size       Printer-friendly version of this article Printer-friendly version of this article

Yes, you like to grow corn and talk about corn, but have you paid any attention lately to the soybean market?

At the end of the harvest season, beans are now at levels not seen since mid-September, and soybean futures climbed 80¢ since earlier in the November. Beans have some octane. And since $13 (beans in the teens) is your benchmark price, your marketing plan may need a jumpstart on implementation.  Let’s do that.

Corn has been relegated to a supply-driven market after five years of increasing demand.  However, soybeans are still in a demand-driven market and are begging for attention, even though the lofty levels of last year’s short supply are now history. Nevertheless the market is concerned again about running out of US soybeans unless some rationing occurs by exporters and crushers. Consequently, the nervousness of traders provides some opportunity for a soybean producer to take advantage of rising market prices. The key to success is managing your risk and not yearning for a few cents more at a time the market peaks into a long tail that is now characterized by the corn market.

Some farmers are out of beans because they saw $14 prices being offered for a good crop in early September. Good for them. Other farmers have beans on storage with no real marketing plan. Subsequently, interest, storage, opportunity cost are 5¢ to 8¢ per month depending on whether they are stored at home or in town. Iowa State University ag economist Steven Johnson also notes that you will likely have substantial income in 2013 that is taxable in 2014, so any marketing at this point should be done with the thought that income should deferred into the 2014 calendar year. Your marketing plan should also include a note about South American soybeans “getting off to their best start ever,” which implies that global demand may not be a driving factor in the soybean market. When the export demand shifts to South America after the first of the year, the US cash market may be more of your friend than futures.

If you look at futures prices, the first thing you notice is that it declines. From the $13.39 on Nov 27 for January beans, to $13.21 for March, $13.00 for May, $12.91 for July, and $12.62 for August, that nearly 80¢ drop does not pay for storage. Consequently, storage may be out of the picture for your 2013 soybean crop, since it is a money loser. So, what do you do?

Johnson’s suggestion is a minimum price contract, if Dad always said never sell beans in the fall. Some elevators will offer a minimum price contract, and you will pay a small merchandising fee for the elevator to set it up and execute it for you. You can do the same for yourself by selling your cash beans, and replacing them with a call option. Johnson says, “The concept is selling high (January futures) and replacing all or a portion of those bushels with something low (March futures). The logic might be in case South American weather conditions deteriorate and speculators continue to hold their record long futures contracts in that March contract.” He says an at-the-money $13.40 March call option is 31¢, and buying it gives you the right, but not the obligation to buy March futures at $13.40.  With any kind of a weather issue in South America, soybean futures would rally. If they reach $14, your call is worth 60¢ (minus the brokerage fee). Beware that March options expire about February 21 and action must be taken prior to then for it to return any value to you. 

Your grain merchandiser can take care of the paperwork for setting up a minimum price contract that sets $13.40 as your minimum price and lets you take advantage of any further rally in the market from the increasing value of your call option. Your merchandiser should also tell you that if the market does not rally and your call option expires worthless, your cost will be the 31¢ premium.

Johnson also notes that if you are deferring any income into 2014, ensure that you are working with a grain dealer which protects you from any loss of money due to the fact you would be an unsecured creditor.


Soybeans have demonstrated a healthy rally from their harvest lows due to concerns about a shortage of soybeans later in the year in the US. While global demand will be fed from South America, any threat to production will be reflected in the US futures market. Due to the market’s inverse for soybeans, which does not pay for storage, it may be wise to sell cash soybeans and maintain your ownership with a call option. Such a plan would protect you from any decline in the cash market and allow you to benefit from any rise in the futures market.

Prev 1 2 Next All

Buyers Guide

Doyle Equipment Manufacturing Co.
Doyle Equipment Manufacturing prides themselves as being “The King of the Rotary’s” with their Direct Drive Rotary Blend Systems. With numerous setup possibilities and sizes, ranging from a  more...
A.J. Sackett Sons & Company
Sackett Blend Towers feature the H.I.M, High Intensity Mixer, the next generation of blending and coating technology which supports Precision Fertilizer Blending®. Its unique design allows  more...
R&R Manufacturing Inc.
The R&R Minuteman Blend System is the original proven performer. Fast, precise blending with a compact foot print. Significantly lower horsepower requirement. Low inload height with large  more...
Junge Control Inc.
Junge Control Inc. creates state-of-the-art product blending and measuring solutions that allow you to totally maximize operating efficiency with amazing accuracy and repeatability, superior  more...
Yargus Manufacturing
The flagship blending system for the Layco product line is the fully automated Layco DW System™. The advanced technology of the Layco DW (Declining Weight) system results in a blending  more...
Yargus Manufacturing
The LAYCOTE™ Automated Coating System provides a new level of coating accuracy for a stand-alone coating system or for coating (impregnating) in an automated blending system. The unique  more...
John Deere
The DN345 Drawn Dry Spreader can carry more than 12 tons of fertilizer and 17.5 tons of lime. Designed to operate at field speeds up to 20 MPH with full loads and the G4 spreader uniformly  more...
Force Unlimited
The Pro-Force is a multi-purpose spreader with a wider apron and steeper sides. Our Pro-Force has the most aggressive 30” spinner on the market, and is capable of spreading higher rates of  more...
BBI Spreaders
MagnaSpread 2 & MagnaSpread 3 — With BBI’s patented multi-bin technology, these spreaders operate multiple hoppers guided by independent, variable-rate technology. These models are built on  more...

Comments (1) Leave a comment 

e-Mail (required)


characters left

Bob Sunderman    
Norwalk, Ohio  |  November, 28, 2013 at 08:49 AM

You never go broke locking in a profit! Too often, we worry too much about hitting the highest price of the year, only to refuse to sell for less as the market declines.


YOUR BEST HARVEST IS NOW WITHIN REACH J&M introduces their patented line of X-tended Reach grain carts, featuring a frontfolding single ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Feedback Form