Can Beans Extend Rally Into Reports?
Aug 11, 2014
The bears continue to be baffled on the price strength that the beans have been able to sustain. There are many in the trade that think unquestionably overbought and we should be trading aggressively lower, considering the recent rains that were near perfectly timed, with cooler than normal temps here in the US, and the fact that Braxzil is getting ready to plant another record soybean crop, increasing possibly 3-4 million acres over last year. The acreage, both here in the US and South America, which could be a record for both, but also digesting the possibility of record yields in the US at 46bpa to 48bpa. The most bearish in the trade think that we could see ending bean stocks swell to 550 million bushels. Pulling down new crop bean prices eventually in the sub $9.00 range. The bulls have stuck with their old crop story that things continue to be tight on the balance sheet, which continues to provide support by asking how long the rains will delay the new-crop harvest supplies down south? Also, reminding everyone that the Chinese demand is alive and well, continuing to book sales that could have the current USDA estimate 3 - 5 MMT's too low. To add a little extra unexpected gas on the bullish flame is the Argentine default, which many expect will keep bushels in the farmers hand for a much longer timeframe. How much additional pressure will this put on US suppliers? Bottom-line is this, yes I suspect we will eventually be swimming in soybeans and prices will be lower, but how we get their could be a very strange path. In fact, it wouldn't surprise me to see the USDA leave their current 45.2 bushel yield estimate "unchanged" in tomorrow's report and actually reduce new-crop ending stocks a bit as they adjust the demand side of the equation a bit higher. This would obviously be viewed as "bullish" near-term and might actually catch some by surprise. For me, I'll be using any type of major surprise rally to the upside as an opportunity to reduce a bit more risk. I don't want to wait until the USDA starts making the adjustments to the supply side of the equation...I'm afraid that's when it could get painful to the downside. CLICK HERE for my daily report....
Will Soybean Condition Estimates Improve This Afternoon? There is talk inside the trade that the recent round of rounds could improve the US soybean crop by 1-2% this afternoon when the USDA releases their crop condition estimate. Look for the numbers at 3:00pm CST.