$14 soybeans possible with summer drought

The prospect of a 2012-like drought could drive soybean prices to the $13 or even $14 range, says Brad Matthews, Roach Ag Marketing. Yet the record-long position of the funds also suggests that if a weather event fails to transpire, prices could drop rapidly below the $11 mark.

Prices in the middle of a drought-like event would be fueled by tight soybean supplies.

"The 70-day supply for the world, if we have a couple bushels off of our yield here [in the U.S.], starts to rival the 2012 70-day supply on hand," Matthews tells "AgDay" Agribusiness Update host Tyne Morgan. "That starts to talk about $13 to $14 soybeans."

Alternately, favorable growing conditions could push prices partway down the futures staircase.

"It will be ugly at first," Matthews says. "You will have probably a quick, hard break because of profit-taking by the funds. They have a record long position right now. That will drive us pretty quick initially. At that point, you'll probably consolidate and wait to find out what kind of a crop we have. If we produce the yield that the government says, and we have great weather, I also think there's probably going to be more soybean acres planted. Then we will have a whole ‚... leg lower at that point in time."

In the near term, it's hard to say where old-crop prices are going. Right now, soybean meal is skyrocketing, though "at some point, you will have some form of a blow-off top." Meanwhile, producers should consider sales in the $11 range on the new-crop November contract.

"I think that there should be a good break in the market here within the next 30 days," Matthews says. "But then, similar to what could happen in corn, we start talking about a La Niña pattern. Very quickly the balance sheet gets very, very tight, both domestic and world, if we have a yield reduction."