Beware soybeans in September

Key Points

• Soybean seasonality is entering a period of historically consistent price weakness
• 2022 could certainly be an exception to the bearish rule, but a trader needs a solid reason to risk holding a long position in beans during the upcoming seasonally weak period

Soybeans seasonality

Each year as soybean harvesting season begins in the U.S. Midwest, there is little doubt left about the state of the crop harvest. It is either good, bad, or somewhere in between - but the critical point is that the state of the crop harvest is a known quantity. As a result, whatever risk premium has been built in typically is shed during this September/early October period.

To get a sense of this hedge unwinding, the chart below displays the annual seasonal trend for soybean futures. As you can see, beans are about to enter another period of typical price weakness that extends from the close on Trading Day of the Year (TDY) #171 through TDY #191. For 2022 this period extends from the close on 2022-09-07 through 2022-10-05.

The chart below displays the cumulative $ +(-) for soybean futures held long only during Trading Day of Year #172 through TDY # 191. 

The table below displays a summary of performance starting in 1937.

What the research tells us…

The standard seasonality caveat applies: In any given year, anything can happen. Still, over the past eighty-five years, two out of every three years see soybeans decline in price as the fall harvest season approaches. In addition, the losing years tend to be significantly greater than the winning years in terms of $ price movements. A trader must have a solid reason to consider holding a long position during this period. Likewise, speculators willing to play the short appear to have a substantial historical "edge" in their favor.