Soybean prices exploded to a three-month high this week, nearing $10.00 per bushel on Friday morning. The market already had momentum from a USDA report showing that fewer soybean acres were planted this spring than previously thought, and weather forecasts helped boost prices further.
Hot and dry weather over the next two weeks could hurt the growing bean crop, which has led analysts to expect this year’s crop yields to be nearly 8% lower than last year’s record-breaking 52.1 bushels per acre.
Despite these bullish-sounding factors, this year’s U.S. crop could still be one of the largest on record, while South America is harvesting a large crop itself. Meanwhile, Chinese demand has shown signs of slowing down, all of which could eventually sink the soy market.
Fearing a pullback, many farmers are taking advantage of the current rally by using put option contracts, which lock in a price floor but allow for upside profit potential if the market keeps rallying.
Alongside the soybean rally, wheat prices continued exploding this week, touching new multiyear highs on drought concerns.