Soybean Demand Continues To Push Higher
Oct 30, 2012
Soybean bears trying to point out the fact that when the USDA raises yields from September to October they generally tend to raise yields in the November report as well. I can't really argue with this logic and in turn suspect the USDA number released next week in their November report will show another slight increase in US production. The bears are also talking about improving rainfall forecast for the Northern regions of Brazil as well. Bulls on the other hand continue to point to extremely strong "demand." In fact soybean export inspections this week were once again very large at 63.358 million bushel. We are now almost a full week ahead of the record fast pace we set a couple of years ago. Personally, I just don't see soybean "demand" slowing down during the next three months. China once again accounted for almost 75% of these export inspections. China simply can't seem to get enough, especially at these prices. Many bulls are now not only arguing that the USDA grossly underestimated the Chinese demand, but they have also grossly OVER-estimated the Chinese domestic soy production. Remember, the USDA currently has China slotted in for about 12.6MMT's of domestic production, several in the trade actually believe that number could now be south of 10.0MMT's. Many soy bulls are also considering the fact North Carolina last week only had about 10% of their soybeans harvested, while Tennessee had about 48% harvested and Kentucky about 54%. You got it hurricane "Sandy" could put more than 250 million bushels of soybeans in jeopardy. The bears can argue all they want about improving conditions in northern Brazil and thoughts of record production, I just think at some point in time the "cash" soy market here at home is going to take off. There could certainly be some money-flow issues that continue to keep a lid on the flat-price, especially in the "back-end" but longer-term I think the bull spreads (like SK/SN) will make a move. Don't forget we have "First Notice Day" on Wednesday in the NOV13 soybean contract. There may actually be a few funds that are forced out of their long positions that simply opt NOT to get back in at this time. Perhaps waiting to see if we can catch a more bullish South American weather story. Technical traders are now on alert as the recent close in soy back below $15.50 is making a downhill run towards $15.00 a reality. Be careful right here in the soy market.
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