Are soybeans done??
Jul 25, 2013
Soybeans and soymeal have taken massive steps backwards the past few days in both flat price and the basis (in old-crop). The bears in the trade continue to talk about how the USDA must have grossly underestimated last years US soy crop, and how the upcoming release of soybeans from the Chinese government is going to drastically change the dynamics of the market. New-crop soy has somehow held it together (until today), with most of the bulls previously thinking yield is overestimated and uncertainty surrounding the "resurvey" data set to be released in the Aug 12th USDA report. Now all of a sudden with good rainfall projected out into August, maybe the yields aren't going to be as bad as some of the bulls had anticipated. Rather than 41-42 bushel yields they are talking 42-43 bushel.
Bottom-line, the old-crop price break is certainly weighing on new-crop prices, but with the August rains still not guaranteed, the trade will remain somewhat apprehensive in penciling in a "record acreage" along with "record yields." This combination remains tough for many to swallow. Most can buy the record acreage talk, but seem to have a very hard time swallowing the record yield! I am in the same camp, and until we know for sure that the weather is going to cooperate in August and early-September, I have a hard time taking myself into any additional 2013 sales. I like our current position (70% priced/hedged) and will continue to look for rallies as additional opportunities. I am NOT going to be a seller of our final estimated 30% of production on the breaks. In my opinion there is just still too much time left to get overly aggressive. Technicians are hoping the $12.20 support area can hold in NOV13 soybeans. Talk is a close below that level could prompt additional "tech" selling and take another quick $1.00 off the price. We are definitely on a "slipper slope right here so make certain you have limited your downside risk. Keep hedges in place!
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