2021 Soybean Meal Hedge Model Results

Below are the results of my systematic hedge model when applied against soybean meal for the entire calendar year of 2021.

MODEL STATISTICS ASSUMING 100% FUTURES:

As you can see, for calendar year 2021, assuming that we only bought or sold futures contracts, the average soybean meal sell signal was $410.47 and the average buy signal was $355.43. 

This is again, only using futures for coverage and simply executing when the model tells you to execute. While these results overall meet the objective of providing a repeatable process that takes the guesswork out of markets, they can be further optimized by:

  • Using options to adjust for underlying supply and demand considerations. For example, when prices are in their 75th percentile and the expected supply and demand is growing, it doesn’t make sense for consumers to buy futures.
  • Adjust duration for market percentiles. Again, looking at the market as a guide, producers should have more forward sales in place when markets are historically high, and consumers should have less forward coverage in place when markets are historically high. The opposite is also true when markets are historically low. 
  • Working ER Targets if needed. When markets are trending lower, my model does not get as many sell signals. lt will still get some, but trending markets skew models. This makes sense because as markets trend lower there are fewer overbought conditions. The opposite is also true when markets are trending higher. For those that are not comfortable receiving 1-5 buy/sell targets a year, I also have what I call ER (expected range) targets that can we worked for any time period. This allows users to supplement coverage if needed and to stay within duration recommendations. 

 

Want to see other years? The article below better defines what my risk management process is and shows the back testing of hedge results across a number of commodities and a number of years.

 

Want to Know More?

Send me a message, I’ll get back to you shortly.