Z2643 – [S] Term Structure (1m-12m basis)

The soybean futures curve is the one signal in the family with no documentation dependency. Positive composite means backwardation, the near-month contract trades above the 12-month deferred as commercials bid up spot supply because they need beans now. Negative composite means contango, commercials defer because supply is ample. The signal is one clean construction: the 1m-12m basis, z-scored on a 1260-day rolling window, tanh-bounded, polarity flipped.

The thirty-six-year pattern is clean and monotonic. The backwardation tail delivers a plus 1.58pp forward 60-day edge above the plus 1.38 percent baseline. The contango tail delivers a minus 1.19pp edge. The signal works as the physical-market voice in the four-signal soy stack.

What the chart is showing. The dark line in the top panel is the 1m-12m soybean basis composite on a tanh-bounded plus-or-minus one scale, positive means backwardation (near above deferred, bullish physical tightness), negative means contango (deferred above near, bearish ample supply). The bronze line in the middle panel is the CBOT soybean front-month in cents per bushel. The bottom panel tracks the 252-day rolling information coefficient between the composite and soybean 60-day forward returns. Dashed horizontal lines mark the plus-or-minus 0.3 moderate and plus-or-minus 0.6 extreme thresholds. Green band fills mark backwardation (contrarian bullish) extremes; red band fills mark contango (bearish) extremes.

WHAT THE CURVE IS TELLING YOU

The composite reading of -0.598 sits in the Moderate NEG band, the 1m-12m soybean basis is in deep contango. The raw z is -0.62. Translation from the physical market, commercials are willing to defer purchases to the 12-month contract rather than bid up near-month supply. That is the price-side signature of either ample supply, already-covered forward books, or visible South American crop progress. The state-conditional forward sixty-day expectation for Moderate NEG is plus 0.19 percent, a minus 1.19pp edge below the structurally-positive soy baseline of plus 1.38 percent.

THE FOUR-SIGNAL SOY STACK

This signal is the fourth and simplest leg of the soybean signal family, the ending-stocks sibling reads balance-sheet fundamentals, the DX + 5Y sibling reads cross-asset macro stress, the CFTC MM sibling reads positioning crowding, and this signal reads the physical curve. Right now the stack reads fundamentals bullish, macro bearish, positioning neutral, curve bearish. The curve CONFIRMS the macro bearish read from the price side, physical commercials are voting with their trades that supply is ample. That dissents from the USDA balance-sheet view that stocks are tightening.

WHAT WOULD CHANGE THIS READING

Two triggers that would re-engage the signal bullishly. First, the near-month bids up into backwardation, composite rises above plus 0.3 as commercial end-users compete for physical supply. That would be the price-side confirmation of the US ending-stocks fundamentals bullish read and stack with the CFTC MM positioning sibling if positioning washes out short. Second, the curve flattens from current deep contango back toward Normal, a less aggressive signal, but it would remove the current physical-market dissent against the fundamentals read. South American harvest progress or weather disruptions through December-March typically drive the next curve inflection.