The following commentary does not necessarily reflect the views of AgWeb or Farm Journal Media. The opinions expressed below are the author's own.
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Soybeans dynamics are once again starting to shift and CHANGE. Now all of a sudden we have cash basis bids at the gulf falling under more severe pressure, meal premiums here in the US are backing off, and so is the meal basis in Argentina. Some sources are indicating meal from Argentina now pencils into the US. There is also talk inside the trade that the inverse in European meal is collapsing as well. There is no question US soybean exports are winding down... Shippers simply aren't bidding up for the US soybeans. Most of the bids are coming from the processors along the river. On the flip side I am hearing the crush margins in China appear to have bottomed out and are starting get stronger. Talk from inside the trade is that Chinese meal prices are once again aggressively moving higher. Meaning Chinese "cancelations" and re-selling of soybean cargoes from Brazil might NOT remain the theme. In other words, China might be back in the game, despite large quantitates sitting at the ports??? There continues to be many moving parts and and a multitude of dynamics that are impacting the soybean market. I suspect extreme volatility as the market tries to understand and adjust to the changes. Yesterday's technical action could certainly make one believe the top is in place, but just remember, we digested a similar pattern back in early-March only to see the market rally almost another $1.00. Moral of the story, from a producers perspective I would NOT be holding old crop beans at this juncture. The "risk-to-reward" seems overly skewed to the downside. Maybe you have another $1.00 of upside potential, but I am thinking you could have $1.50 to $2.00 plus of downside risk. New-crop soybeans are a different story, since you have many more potential bullish cards still in the deck. Just remember, you also have many bearish cards in the deck as well. We are going to remain patient and look to reduce more new-crop risk on another $0.40 cent rally. CLICK HERE for my daily report....
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