Your soybeans may be a long way from maturity. And since you have flipped the calendar to September you wonder if they will mature enough to avoid a yield loss should an early frost take its toll. You may or may not have crop insurance protection. But you have a marketing opportunity, if you want to sell the frost scare.

The market wants #2 yellow soybeans, both in quality and quantity, but an early frost makes that a near impossibility, particularly if the crop is late in maturing. Iowa State economist Stephen Johnson says most soybeans will be in the R5 stage by mid-September, when beans begin to form in the upper pods, but they are not safe against a hard freeze until the R6 stage. That is when there are full sized green beans in the pods at the top of the plant. Even then some yield loss will be recorded.

Throughout the Cornbelt the average date of the first killing freeze ranges from early October in the north to late October in the south. However Johnson says the cool temperatures of this summer have little predictive value for estimating the date of the first frost. He says the hottest summer of the last 38 was in 1983 and the first killing frost that year was six days earlier than usual. The coolest year was 1992 and the first frost was 1 day early. While the cool weather of this year may cause one to think the frost would be early, Johnson says that has kept a premium on soybean futures.

Johnson says Nebraska farmer and soybean marketing specialist Roy Smith has identified a frost scare that typically occurs in late August or early September in the bean market. Of the last 30 years of the bean market, “Smith found that the single day for “selling a frost scare in soybeans” was 9-7, or the 7th trading day of September. This date typically falls just ahead of the USDA September Crop Production Report. In 2009, the September Report will be released on Friday morning, September 11th. Thus, the 10th could be a key date for implementing a pre-harvest sales strategy for soybeans.”

How do you sell the frost scare? Johnson says if you have adequate storage, selling November futures would be one tool. Another is to buy a November put option and if the US has a good crop and the South American crop gets off to a good start, then you have a floor in the market. Johnson says forward contracts with an elevator or processor will allow cash beans to be sold, but with a wide harvest basis, use a hedge to arrive contract that allows the basis to be set at a later date. He says the use of a January or March delivery date will allow the basis to return to normal, which may provide a better return to storage.

Farmers with Crop Revenue Coverage or Revenue Assurance with the harvest price option types of crop insurance will have a floor of $8.80 for soybeans. While those covered bushels can be sold with comfort, avoid selling uncovered bushels. Johnson says the use of other futures hedges or options strategies should be used for bushels that you do not want to commit for delivery.

The lateness of the soybean crop in maturing may cause frost to be a consideration in the marketing of the crop. The market has a tendency to rise because of a frost scare in the early part of September, and usually before the September crop report, which this year is September 11. The use of either futures, options, or cash marketing contracts can be used, depending upon whether a marketer wants to commit delivery. If revenue crop insurance is applicable, those covered bushels can also be sold.

Source: Stu Ellis, University of Illinois