Foreword by Simon Jacques
Anyone wanting soybean meal found it in very short supply during October. The basis has soared in most regions during the crop season. The harvest was slow and not without logistical issues in the eastern corn belt.
Soybeans Farmers have also chosen to not sell below their break even* making the new-crop oversold by both merchants and funds.
But the reaction of these commercial buyers shows how they don’t sit on their hands when facing price and volume risk.
Those who confronted higher prices in the cash market have double-bought their needs to secure their supply or bought the next best thing: grain futures contracts. A Long Futures can be seen has a surrogate. The Profits from the long hedges offset some of their higher costs.
Authors emphasize how crucial is soybean meal price for the poultry business. In this paper, they try to determine the price direction for soybean meal using the futures market.
Authors Alexandre Nadeau and Kurt Pelletier are undergrads students in Finance at Université de Moncton in Canada.
*Ground that a farmer rent land, for a soybean yield of 50 bu/ac, a soybean farmer needs at least $11,00/bu cash price to breakeven. This supply is still un-priced.
Given too much uncertainties in the market both the meal and soybean market could carry up during November and December (The wild card window just before the South American Season).