Both corn and soybean prices have been feeling downward pressure all year, leaving little room for error when it comes to crop yield, as one crops expert noted in a Farm Ranch Guide report.
Despite harsh weather conditions that have been affecting crops globally, there are regional variances when it comes to yield. In the U.S. specifically, yields could end up better than initially forecasted.
“We’re not going to have a horrible soybean yield from a yield standpoint, although acreage was down. A couple months ago we had a sudden surprise when we ended up planting more corn than we first expected, and less acres of soybeans than expected,” said Frayne Olson, NDSU crops economist/marketing specialist.
In the end, there’s always a certain level of uncertainty when it comes to forecasting crop yields. Nonetheless, that should give traders enough to work with in terms of volatility expectations.
“Our margin for error is much thinner than it would be on corn. It’s a similar story, where we are starting to get better yield reports coming in, and we’re zeroing in on what the production levels look like,” said Olson. “We’ll have to wait and see as we get closer to the end of the harvest season. In particular you get into southern Minnesota, into South Dakota and North Dakota, I think our yields are going to be much more variable than people had first expected. The final verdict on soybean production has yet to be written.”
Capture Upside With 2 ETFs
Investors, short-term or long-term, looking to get exposure to either corn or soybeans can opt for futures, but these strategies can be complex especially for the novice investor, which could potentially result in heavy losses. Exchange traded funds (ETFs) that offer exposure to agricultural commodities can provide an easier solution, but still give investors exposure to futures.
For plays on corn, traders can consider the (CORN ). The fund tracks three futures contracts for corn traded on the Chicago Board of Trade. It includes 35% second to expire contracts, 30% third to expire contracts, and 35% December following the third to expire. The various contract exposures help the fund limit the negative effects of rolling contracts, especially during a market in contango.
For traders looking for opportunities in soybeans, consider the (SOYB ). It can essentially provide similar exposure to what investors could obtain by trading in soybean futures contracts themselves. This offers short-term traders or longer-term buy-and-hold investors easy ingress regarding soybean price exposure.
For more news, information, and analysis, visit the Commodities Channel.