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Jan vs March Soybeans
January 2021 soybeans are trading 16 cents over March 2021. Below are two charts. The first is the current Jan vs March spread. The second is a 40 year Jan/March spread chart from Moore Research (MRCI). The years when Jan traded at an inverse to March we had tight US domestic stocks. If the US has adequate to burdensome stocks, then Jan trades at a carry.
I think the Jan vs March spread is an important spread to watch. Nov and Jan are strictly US new crop soybean export months. South America starts to harvest early soybeans in February. The earliest South American soybeans are available on the global export market are for the March contracts. So Jan is the last month when the US is the only game in town for soybean exports. March soybeans can represent both US and the start of South American exports.
What does this all mean? It means the market thinks there is a risk that the US could be tight in new crop and will need to have some level of demand rationing until 2021 South American soybeans are available on the global export market.
Do I want to trade this spread? Not really. But I do want to follow it because I think soybeans have potential to rally this year. This spread is telling us the market is already concerned about new crop tightness. I recently spread SX vs CZ and that is my spec position of choice right now when it comes to soybeans and corn. I’ve thought about getting long SX20 vs SX21 or just buying soybeans outright. I think they are all possibilities at this point. If the WASDE has new crop soybean ending stocks in the 300s on Tuesday, China starts buying more US soybeans then expected, and we get some weather issues, we could start seeing some strong price action in these spreads but also the flat priced futures too. Stay tuned!
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Jan vs March Soybeans
MRCI Jan vs March Soybeans 40 Year Historical Chart
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