Why Some Traders Believe Soybeans Could Reach $11.50
Sep 07, 2010
Corn has certainly been the topic of great concern as of late, but I have had many clients asking about Soybeans and specifically what we are hearing on our of the trade.
To begin with lets assume the yields come in somewhat as expected between 43.5 - 44 bushels per acre. This will put our soybean carryout somewhere between 200-220 million bushels (depending on who does the math). Based on the way demand has risen the past few years this could ultimately leave us in a relatively tight stocks situation, but more than likely one that would not worry the floor or cause any significant jump in price. Now if we see problems during the planting stages or growing seasons in South America all bets are off and prices could in fact be off to the races.
Now lets assume we see bean yields fall slightly and they come in somewhere between 42.5 - 43 bushels per acre, or later in the year we see a bigger jump in soybean demand than we expected. This could reduce the US soybean carryout to 120-150 million bushels (depending on who holds the pencil), which in this case would certainly send prices higher.
If we come in with yields in excess of 44 bushels per acre you would have to assume this as bearish data.
Don't get caught short or think prices will fall back long term though on news of higher yields. Sure we may fall back on the knee jerk reaction, but ultimately prices will find support and look to move back to higher ground. There are several key factors now coming to light that have us and many other traders thinking longer term price action will be much higher.
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