Soybean futures rallied over twenty cents early Wednesday morning ahead of the March 31 Prospective Planting and Quarterly Stocks report. Part of the rally was in response to a technical bounce higher after the market sell-off the day prior when it was announced that Russia and Ukraine would meet again for peace talks. As you know, any hope of peace puts more potential on the Ukraine spring crops getting planted in a timely manner.

On Wednesday morning, however, the hope of peace was met with more bombing action by Russia, which put “war risk” back into the market and allowed for a price rally higher.

In terms of soybean production, Ukraine is not a major global player; however, they are the world’s largest producer of sunflower seeds and sunflower oil. If their sunflower production is down, that means more palm oil and soybean oil will need to be used as substitutes.

But perhaps the bigger reason for the rally on Wednesday morning was linked to rumors circulating within the industry that China Sino grain would potentially soon purchase U.S. soybeans to replace the 3.5 mmt (128 million bushels) recently sold from the Chinese reserve. Let me repeat that: 128 million bushels!

If true, this alone could drop current U.S. soybean 2021-22 ending stocks from 285 million bushels down to 157 million bushels. Also, if this rumor is true, it would help potentially absorb any large soybean acreage announced in the upcoming March 31 Prospective Planting report.

Related:Dig into the latest USDA report

Seasonal soybean futures patterns

Seasonally, when looking at November (new crop) soybean futures, they have a tendency to trade in a sideways pattern during the month of April, with November soybean futures prices then having a tendency to work higher into early to mid-June.

The chart below confirms that notion. During 13 of the last 20 years, the price of November soybean futures traded higher sometime during the second quarter than they did in the first quarter of the year. In looking at the years below, when ending stocks were tight or perceived to be getting tighter this time of year, those are the years where the second-quarter rally had a stronger tendency to occur.

As you know, past performance is not indicative of future results, and with all of the drama surrounding this year’s global grain and oilseed production, anything can happen. Be mindful of your cost of production, and be ready for the market to respond any way that it wants to during this historic year of tight ending stocks in nine U.S. grain and oilseed commodities, inflation, and war.

Related:Prospective Plantings point to 2022 acreage expansion

Reach Naomi Blohm at 800-334-9779, [email protected] or on Twitter (@naomiblohm).

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