Sep 30, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


December 2013 Archive for Current Marketing Thoughts

RSS By: Kevin Van Trump, AgWeb.com

Kevin Van Trump has over 20 years of experience in the grain and livestock industry.

Bean Market Volatility to Start 2014...

Dec 30, 2013

Soybeans traders are watching the MAR14 contract as it technically consolidates just above the $13.00 level (don't forget its "first notice day" in the JAN14 contracttomorrow). The question now is will the soybean market break-out be to the upside or the downside???  The weather has improved in South America and I am hearing that shorter variety soybeans are starting to be harvested in parts of Brazil.  Word is producers can currently bank between $200 and $300 per acre on their soybean crop, and this is causing concern that second-crop soybeans will be a much more popular choice than in years past where second-crop corn was the favorite. Keep in mind  additional setbacks in the Brazilian real in comparison to the US dollar is also making the Brazilian exports look more attractive. The bears are also talking about  the fact weather complications may keep a small portion of the Argentine corn crop from going in the ground, ultimately pushing more acres into soybeans.  On the bullish side of the equation the front-end remains insanely tight and Chinese demand extremely strong. The bulls are also closely monitoring the dry-conditions in southern Brazil, where there are still several unanswered questions regarding production. Net-net, the teeter-tottering back and fourth between the extremely tight supply side conditions nearby vs. the fear that a glut of surplus is coming down the pipeline as both Argentina and Brazil harvest a NEW all-time record crop followed up by record US soybean acreage in 2014 continues.  Several inside sources still believe old-crop supplies have the potential to reach prices above $13.50, possibly even pushing closer to $14.00 per bushel, but in the same breath will tell you prices moving forward in 2014 (new-crop supplies) could fall to sub-$10 levels. I suspect the next 30-days will be insanely volatile and set the tone for 2014.  If the weather in South America cooperates and the harvest starts to confirm a NEW record it will be tough to rally the back-end. Keep your hedges in place. Spec's can continue to entertain bull-spreads on the front-end.  Click here for all my daily grain comments....   

Mixed bag for Corn and Beans....

Dec 27, 2013

Since Monday Soybeans have backpedaled about $0.30 cents from their high and corn is off about $0.10 cents from it's recent high… "Weather" is primarily the main culprit as better chances for precipitation and cooler temps in Argentina and southern Brazil have prompted traders to reduce some of the pre-holiday "weather premium" that had been added.  Since soybeans were the biggest beneficiary on the way up, they have suffered the biggest setback as the forecast has improved.  


NEW Data released this morning: 

Export sales were stronger than expected across the board: Corn export sales of 1,478,500 MT for 2013-14 and 509,200 MT for 2014-15 reported (with Japan, South Korea and Mexico big buyers);  Soybean export sales reported at 720,200 MT for 2013-14 and 68,100 for 2014-15 (China and Mexico big buyers); Wheat export sales reported at 596,900 MT for 2013-14 and 60,000 MT for 2014-15 (Brazil, China and Egypt all US wheat buyers last week). 

Ethanol production ticked back slightly for the week ending Dec 20th at 926,000 barrels per day vs. 928,000 the previous week.  Keep in mind this is still extremely strong and much higher than the 834,000 we were producing a year ago. Ethanol stocks jumped....Like what your reading, click here for my daily report...

New Crop Beans...Whats the Smartest Play?

Dec 24, 2013

Soybean traders are focused on South American weather and the possibility of Chinese "cancelations." With parts of Argentina and southern Brazil looking as if they will remain hot and with limited rainfall during the next 6-10 days, the bears might start to get a little nervous.  Yes, there is still a fear that China, at any moment, could step in and cancel 2-3 million metric tons of US soybeans, but with global supplies currently so tight, "weather" and the thought of any possible production problem will trump ALL other headlines. With this in mind I suspect our final two "old-crop" cash-sale targets at $13.55 and $13.72 may actually end up getting triggered during the next couple of weeks.  As for "new-crop," I continue to believe the smartest play for producers is to keep hedges and floors in place, at least until Federal crop insurance prices are established at the end of February.  Once we have our insurance floor established we may then want to consider lifting...Click here for my daily grain comments.....  

Three Things You Need to Know About Corn...

Dec 23, 2013

Looking Back: Remember, last year at this time the DEC13 corn contract was trading just under $6.10, this year the DEC14 contract is trading at around $4.60.  What makes it so difficult is the major inputs have not pulled back nearly as much. Land prices, seed prices and equipment prices still remain at or near last years levels. This now puts many producers right at or near break-even levels for new-crop. For many producers still holding old-crop supplies, cash-prices are now about $2.50 to $3.00 per bushel cheaper than last year. If you are wanting to know, the DEC14 contract high was posted back on Sept 19, 2012 at $6.14, the low was posted on Dec 16th of this year at $4.47^2.  

Corn Acres? There has been a lot of talk as of late regarding 2014 acreage.  The USDA will give us their first 2014 production estimates at the end of February during their "Ag Outlook."  Many analyst however are already throwing their hat in the ring.  From my perspective I don't think corn acres are going to be as low as some are thinking.  Remember, there was some 3.6 million acres of corn that supposedly didn't get planted last year, that's on top of the 95 million plus corn acres that did get planted last year. We also have to take into account about 1.6 million acres coming out of CRP ground and an additional 4.7 million acres of various crop ground that went unplanted as well last year.  Net-net we are talking about almost 10 million acres that need to find some type of home.  For this reason I suspect we still see a hefty number of corn acres go in the ground. Planted corn acres between 92-93 million would NOT be a surprise.  Unfortunately, this is not a number that will excite the bulls. Therefore my thoughts are the market will continue to grind lower until prices have reached a level that discourage producers from planting so many corn acres. Unfortunately the grind could continue until prices fall far enough to get US plant4ed corn acreage sub-90 million.  

What About A Rally? There has been a lot of talk about a short-covering fund induced rally hitting the corn market?  If you look back in history the corn market tends to most often post its "winter rally" high by the second or third week in January. I wouldn't be surprised to see something similar this time around. If you have been waiting on a rally, the next 2-4 weeks might be your window of opportunity (small, but none the less a rally). Technical bulls traders might argue for a more robust rally on the merit that the corn market rarely ever trades or makes a "V-shaped" bottom.  Meaning prices in the past have tended to push lower, then rally back (20-40%) before reversing and posting their absolute low. This time around we have yet to see that historical pre-low bounce. For those with very little 2014 priced, lets hope that "bounce" comes sooner rather than later...                                     Click Here for all my grain comments in my daily report....            

Corn Follow Through Looks Good...

Dec 20, 2013

Corn bulls are hoping strong demand, additional short-covering and talk of new purchasers coming back to the US (South Korea, Japan, etc…) can provide some renewed strength. The latest USDA export numbers support what many had been hoping over the last few months, that the US could be a low cost provider and see demand pick up.  Corn sales were reported yesterday at 827,100 tons for 13/14 and another 45,200 tons for 14/15.  This was substantially higher than what the trade was looking for and once again excited the corn bulls.  The market closed above the $4.30 mark for two consecutive days, which was a line in the sand that needed to be maintained, and could be the momentum that the corn market needed to push back higher towards that $4.50 mark.  We dont have many trading days left this year so any short-covering and demand increases could provide some upside fuel for corn prices.             Click here for my daily grain report...

Corn Exports Strong.....

Dec 19, 2013

Corn prices remain on shaky ground as ethanol production slips, stocks rise and talk of  Chinese "cancelations" continue to run wild. This morning export sales numbers might provide a little bright spot and help stabilize prices for the interim, but I still remain concerned about the back-end price risk associated with the new-crop.  Funny to see China listed as a buyer again of US corn this week while all the headlines continue to talk about the "cancelations."  Not much new to report this morning. Producers should  continue to keep hedges in place and longer-term spec's should only be playing the game from the bearish side of the fence. Short-term swing type traders can consider bull-spreading the front-end and or looking for a small bounce during the next few weeks.  Exports today were at:

Corn sales were reported at 827,100 tons for 13/14 and 45,200 for 14/15. The trade was looking for a combined number between 550,000 and 750,000 vs. the 695,000 reported last week.  CLICK HERE for my daily grain comments.....

Tight Supply...South America Weather Support Bean Prices.......

Dec 18, 2013

Bean traders are wondering if the bullish reaction to the "weather story" in Argentine was slightly premature. Yes, the temps are hot, but it looks as if good rainfall and cooler temps are in the forecast. Meaning the warm, dry weather might have been a blessing for the Argentine farmers who needed to get more of their crop planted. Lets also not forget the early Brazilian bean harvest will be kicking off in just a couple of weeks. There has also been several major logistical improvements made since last year in a effort to better expedite the exporting of soybeans. Remember, last year the Brazilian's need to replenish their domestic supplies of soy so a large portion of the early beans coming out of the field wen directly to the crushers (who were paying a premium).  This year thats not the case therefore I suspect the majority of the early beans will go directly to the ports.  Anyway you slice it, I simply see nothing coming out of South America that is currently helping  to support new-crop soybean prices.  Here at home we also have some bearish longer-term concerns as US producers plan on planting more acres and the USDA might come out on Jan 10th and raise their old-crop yield estimate???  As you can tell I am starting to backpedal a bit on my old-crop bullish soybean slant. Producers need to maintain hedges on ALL remaining bushels with a price floor at or above $13.00.  My final two cash-sale price targets remain at......be patient!  Click here for my daily grain comments.....

Volatile Push Higher for Beans...

Dec 17, 2013

Soybeans remain extremely volatile!  Yesterday's excitement stemmed from talks that China was trying to buy more US soybeans for late-Feb delivery as they became more concerned about South American weather, basically a couple of potential dry pockets in Brazil and some intense heat brewing near-term in Argentina. On the flip side, the bears are quick to point out that last year at this time the Chinese were busy canceling over 300,000 metric tons of unshipped US soybeans.  We also need to recognize the NOPA domestic US crush numbers were not nearly as strong as some had anticipated. In fact rather than meal usage being up by 2-3% in the first quarter of the marketing year (like many bulls had thought) it appears to be somewhat flat. Surprisingly, to me soybean oil usage though was up 15-20% compared to last year. Bottom-line, however, remains the fact several analyst might now be able to start pushing their March 1 quarterly soybean stock numbers higher rather than lower, especially with the strong possibility of the USDA raising their yield estimate in the final January report. This is why I continue to believe, even though old-crop prices may have another push to the upside on tight global supplies and at least one South American weather story, a floor must be in place on ALL remaining unsold soybean bushels.  Click here for my daily report...     

Acreage Debate for Corn and Beans in 2014.......

Dec 16, 2013

Corn Acres For 2014: Analyst continue to debate how many corn acres will go in the ground her in the US next year.  Most seem to be thinking, if prices remain at or below this level, we will see a 3-5 million acre net reduction in US corn acreage in 2014. The general consensus (at least from those I am talking with) seem to be for around 93 million acres. Even though this is a nice size cut, its still not to the sub-90 million acre number that we believe the trade is ultimately searching for.  Remember, for the bulls to run the market needs to.... Click here for all of my daily comments....

Soybean Acres For 2014: There is no question in my mind that US producers are going to plant more soybeans in 2014. The question obviously is how many more acres?  2013 was a record at 76.5 million acres planted, now there is already talk that 83-84 million acres could be planted this next year.  Personally, I am not looking for a 7 million acre jump but I do think we could easily add another 3-5 million soybean acres.  There certainly doesn't seem to be as much nitrogen being put on the corn stalks like we have seen in the past...  Click here for may daily report...  

Meal Demand to Push Beans Higher?

Dec 15, 2013

Soybeans are taking a few steps back as Chinese cancelations loom, Argentine production comes online and US producers make more sales.  From what I heard, some 110,000 tons of Argentine meal was booked for delivery into Korea for April delivery at about $45 per ton less than US supplies.  I am also hearing US farmers (in several areas) are starting to dump more of their remaining soybeans. There was some that Cargill and a few other commercials were experiencing long lines to unload beans yesterday. One Cargill location reporting a 4-hour wait time on soybeans! There is no doubt the Chinese demand has been insanely strong, but if the dynamics of the meal market, which has clearly been the driving force, begins to change, the front-end run could be close to over.  Lets not forget China still has over 12 million metric tons of US soy that they have committed to but have still not shipped.  Keep your eye on the NOPA crush numbers set to be released on Monday. A NEW all-time record crush rate  could be in the cards, giving us possibly one last push higher.  I am also keeping an eye on the South American weather.  There is some talk of extreme heat hitting parts of Argentina this weekend, but it doesn't seem long-lasting and looks to be followed up by cooler temps and good rainfall. Bottom-line, the bulls seem to be getting a little more nervous, hence the market has given back about $0.40 cents from tuesday's high of $13.53^4.  Click here for my daily grain report....  

Selling Cash Bushels?

Dec 13, 2013

Producers who continue to hold old-crop corn bushels, and are in areas that are enjoying a good strong basis, might want to consider pulling the trigger NOW on your "cash-sales" and reducing your risk by re-owning cheap calls on the board. Get with your advisor to build a strategy that is right for your specific operation.  I am just afraid as we move into Jan-Feb-Mar-Apr heavy farmer selling is going to weaken the basis and potentially drive cash-prices even lower.  The more I travel around and the more producers I talk with, the more I see bushels that have NOT been sold or priced.  I am telling you now this crop is bigger than the USDA is currently estimating, and I also think we have underestimated just how much "unpriced" corn farmers are still sitting on. I know lots of producers are sitting on a good chunk of cash, and believe they have the money to ride out the wave.  If your one of these producers, please remember "the markets can remain irrational much longer than most can remain liquid." Lets also not forget come late-Feb the USDA is going to throw out their estimate for next years crop which could push ending stocks to 2.4 billion or maybe even higher... Without a major "weather" story, that type of ending stock number would darn near put the final nail in the coffin for corn. Prices sub-$3.50 could become a real-reality! make sure you are considering ALL of the pieces. Don't forget the December corn contracts go off the board today.                                     Click here for all my daily comments......

Exports Remain Strong for Beans

Dec 12, 2013

Soybean traders continue to digest the same news regarding tight old-crop supplies, stronger than anticipated Chinese demand, and a record large South American crop right around the next corner. There are starting to be a few more questions here at home in regard to overall domestic meal values. I have been hearing more crushers are covered through January and are now placing more emphasis on production in return the bids sound like they are starting to waver in some locations.   I continue to believe we have one last push to the upside, but I am not confident enough to roll without a floor in place. Producers who are still holding old crop soybean bushels need to make certain they have a flat-price floor or some type of hedge in place should the front-end of this market start to fizzle out. From a spec perspective, I see no reason to jump in as a NEW bull at this period in the game despite continued strength in the exports. Click here for my daily report...

Exports today saw soybeans reported at a combined 1.514 million vs. 850,200 reported last week. 13-14 at 1.11M Tons;14-15 at 413,900. T he trade was looking for number between 750,000 to 950,000 metric tons.

 

 

  •  

Soybeans: the Good, the Bad, & the Ugly...

Dec 11, 2013

Soy traders are digesting "The Good, The Bad & The Ugly..."  The good news for the bulls was the fact US old-crop ending stocks were reduced to 150 million bushels (slightly below expectations) as the USDA raised exports by +25 million bushels and raised domestic crush by +5 million bushels and raised soymeal exports by 250,000 short tons.  The bad news is the USDA raised our imports by 10 million bushels and pushed the Argentine crop higher by 1 million metric tons, they also raised our soybean oil ending stocks by 55 million pounds and cut their estimate for bio fuel usage by 400 million pounds.  The ugly news is that Brazil's crop looks as if it will need to be raised higher by about 2-3 million metric tons and the Argentine soy crop might need to be bumped another 2-3 million metric tons higher as well.  You can also throw into the mix talk of the US crop getting BIGGER by the end-of-year January USDA report (Jan 10th).  Several respected sources are now talking about a possible one bushel per acre jump in the overall yield estimate. Even though I am still bullish old-crop soy prices, thinking the January contract has a little more room to the upside.  I am also extremely respectful and cognizant of the fact we are getting dangerously close to the music coming to an end. The name of the game from here on out is NOT to be left with any bushels in your hand when the Chinese decide to throw down the "cancellation card."  Remember, big bulls constantly need to be fed. I hate to say it, but Its getting harder and harder as each day passes to imagine a whole lot more "bullish news" being revealed in regard to old-crop soy. Moral of the story, if the bulls run out of old-crop headlines the entire bean complex could take several steps back.  Producers need to keep your hedges in place as we begin our descent into the new-crop abyss.   Click here for my daily report....

Can the Corn Rebound Last thru Today?

Dec 10, 2013

Corn slowly rebounding from last Monday's $4.18^4 low in the MAR14 contract on more short-side covering ahead of today's USDA report. Trade still concerned about the Chinese move to reject what is thought to now be some 15-20 cargoes of US corn. Syngenta is saying they applied for approval of the MIR 162 genetics back in 2010, so there is obviously more to this story than the GMO concerns.  It obviously has more to do with domestic supplies and exporters who have been able to dupe the Chinese government in regards to the origination of the bushels. Anyway you slice it the uncertainty is cause for concern and is not only an issue for Chinese importers but is also causing US exporters to halt shipments of corn to China. obviously nobody wants their shipments kicked or rejected so the search is on for alternative buyers.  Unfortunately some exporters are being forced to seek the cargoes at a discount to keep the wheels turning.  This ultimately could weaken the basis to some degree in the days ahead. Make sure you are putting all the pieces together.  Wouldn't be surprised to see a more bearish "wild-card" thrown at the corn market today by the USDA.  Just don't think it will be as bullish as some are anticipating... Keep hedges in place! 

Corn - Trade remains somewhat uncertain about ending stocks moving forward.  Will the recent gains in demand ultimately be offset by an even larger record crop?  Will test weights ... Click here for all my comments...

 

Exports - Currently the USDA has exports estimated at 1.4 billion bushels.  Keep in mind this number was pushed higher in the Nov report from the Sept estimate of 1.225 billion bushels. Talk is the USDA may make another adjustment higher...Click here for all my daily comments... 

Ethanol Currently the USDA is estimating 4.9 billion bushels of corn will be used for ethanol. This is up from the 4.648 used last year but still below the 5.0 billion bushels used in 2011/12. Ethanol margins have been strong and there is talk.....Click here for all my daily comments... 

Feed & Residual - Currently the USDA is using 5.2 billion bushels, up form the 5.1 billion estimate back in the Sept report and massively higher than the 4.333 billion used last year and the 4.577 used in 2011/12.  This could be the one that shocks .....Click here for all my daily comments...

Chinese Production There was some talk late last week that the current Chinese corn crop may actually be bigger than originally anticipated.  China talking...Click for all my daily comments... 

South American Production - There is talk the USDA will lower Argentine production for sure and possibly even Brazil's corn production on fewer acres of full-season and second-crop corn being planted. From my perspective the USDA already has...Click here for all my daily comments...

Corn Bulls Eye next USDA Report

Dec 09, 2013

Corn continues to debate bearish talk of Chinese cancelations against more bullish talk regarding short-side liquidation and stronger exports and ethanol demand. I also have to believe the bulls are keeping a close eye on shrinking corn acres in both Argentina and Brazil. Bottom-line, I still believe there is more downside risk, but since I respect the power of "money-flow" a short-term bounce in the MAR14 corn contract to the mid-$4.50s can not be ruled out of the equation. Producers who need to make more cash-sales need to continue targeting this area.  

Here are some the USDA highlights that we see coming in the next report.  Exports have remained strong and could push higher. Ethanol is off its record pace of over 5 billion bushels being used but margins are high and there is talk we may be north of 5.1 billion bushels for etahnol production in 2013/2014. Feed/residual and China production could both see higher numbers for the report. To offset that to some degree may be a lower corn number for acres planted in South America.                                                     Click here for all of my market comments before the USDA report....

Soybean Debate: China Cancellations vs US "Sold Out"

Dec 06, 2013

Soy continues to debate whether the US is going to soon be "Sold Out" of available soybean supplies or will the Chinese make cancelations and switch to South American  suppliers? The trade is obviously concerned about the stories circulating in regard to the  Chinese reselling cargoes of US soybeans. Remember, we haven't seen the USDA announce any NEW 2013/14 soybean sales to China the past few days, just the 2014/15 announcement. Kind of makes you wonder if China has turned the page? There is also starting to be some concern and whispers that the Argentine government has or may be wanting to reduce their export tax on soybeans. Thoughts are the Argentine government desperately needs income, and with export taxes so high producers have become very reluctant to let go of their bushels. By reducing the tax the Argentine farmers might let loose of the stranglehold they have on the soy supply. This in turn would obviously put more global supplies in play and take some of the pressure off the US. Ultimately meaning prices could ease to some degree as the market relaxes a bit on the access and availability of Argentine soy. Remember, it has been the meal market that has primarily fueled the front-end bean rally. You had the political complications and raging inflation in Argentina promoting producers to hold back their soy supplies. Simply put they were making more by "holding" the bushels than by selling the bushels. Then in Brazil there was the big logistical shift to exporting corn rather than soy or meal. Hence the US has been forced to be the main supplier. With our domestic demand fairly strong and US exports in high demand as well, processor and exports have had to somewhat fight over the available soy bushels. Therefore prices have remained inflated. Just understand, if one of the legs above crumble then the whole house of cards will come tumbling down. Don't forget Goldman and crew will be starting their big roll out of the January bean contract and in to the March today. Historically, the roll has caused some pressure on the bull spreads so be cautious. Click here for all my market comments....

China & Brazil: Is There a Bullish Card for Soybeans?

Dec 05, 2013

The question is will the Chinese bite on the rhetoric or will they actually wait this year until the bushels from Brazil starting hitting their docks before they cancel the additional US cargoes?  I am telling you now if the Chinese don't start making cancelations soon and Brazil runs into any type of early exporting problems soybean prices have to travel a lot higher in order to ration demand.  Before you get yourself insanely bulled-up just keep in mind last year the early beans in Brazil were going to help replenish their domestic supplies, which was cause for some of the export delay. I suspect this year the early beans will head straight to the exporters to expedite the process. As for 2014/15 soy prices, the story remains the same. Without some type of major weather hiccup we are looking at 15-18 million more metric tons of production out of South America and NEW record soy acres going in the ground here in the US (my guess, 4-6 million more acres than last year). Moral of the story, if the weather cooperates, which is a big if, supply will over run demand like "Grant took Richmond." We will go from an insanely tight supply pipeline to swimming in beans quicker than you can blink an eye.  Make sure you are understanding the game and the rules right now, they could change in a real hurry.         Click here for my daily report... 

Corn Bulls Remain Optimistic...

Dec 04, 2013

Corn bulls remain optimistic as demand is strong. Not only are ethanol margins some of the best we have ever seen, and feed usage improving, but US export sales are now close to 1.0 billion bushels and already totaling more than 70% of the annual USDA forecast. Bulls are also excited to see Informa lowering their estimates for Brazilian corn from 70.6 million tons down to 70.1 million tons yesterday. I am assuming the 500,000 ton reduction is because of an increase in soybean production, which was pushed 1.3 million metric tons higher. I should also point out the Argentine corn crop is looking like it could be 1-2 million metric tons lower than last year on fewer planted acres (simply too wet in several areas and not as profitable to plant corn). Keep in mind the Brazilian government just released data that showed corn prices in the main production area of Mato Grosso have dropped by about 40% this year, and now stand at or beneath $2.05 per bushel, well below what is thought to be a $2.25 to $2.50 break-even price.  Helping to offset the corn reduction in South America however is a one million metric ton increase for corn production out of Ukraine. Setbacks in corn production out of Europe were also equally offset by gains out of Russia. Net-net there just isn't really much change to the global picture. Nearby traders continue to watch China play carnival games with US corn. As of this morning there are rumors that 6-8 US corn cargoes have now been rejected. Even though you can almost guarantee the shipments will eventually make it inside China, until the shenanigans with the importers and GMO varieties are sorted out, its hard to imagine a lot of new buying of US corn by the Chinese.  With funds holding a near record short position, it seems any type of nearby bounce will have to be fueled by talk of more profit taking and liquidation ahead of the holidays by the big money managers. The "demand" card is certainly in play, but I am afraid we are going to need some production problems or bad weather cards to help us build a truly bullish hand. Producers should continue to use the small interim bounces as an opportunity to reduce more risk.  Specs will more than likely be looking to sell a bounce to the upper end of the range ($4.45 to $4.50 vs. the MAR14 contract).                       Click here for my daily market comments...  

Will US Soybeans soon be "Sold Out"?

Dec 03, 2013

Soy bulls continue to point to almost unbelievably strong Chinese demand. With soybean supplies at the Chinese ports building and talk of importers looking to resell or roll a portion of January deliveries, you have to wonder just how much longer can the Chinese buy US soybeans?  Keep in mind they have already purchased almost 5.5 million metric tons more from us than they did last year. In fact, there is now starting to be more and more talk of the US soon being "Sold Out" of soybeans. This is why I believe the front-end of the trade must somehow figure out a way to ration demand, meaning nearby flat-price and spreads have to keep doing their job. The back-end 2014/15 price risk still remains the same as Brazil's soybean planting season is running slightly ahead of schedule and is near 90% complete. The problem is growers in Brazil continue to report near ideal growing conditions.  With good moisture in the forecast for the next couple of weeks and the harvest rolling in some areas during 30-45 days its tough to imagine a major weather hiccup at this juncture.  If weather conditions continue in their current pattern a NEW record crop north of 90 million metric tons is almost a certainty (USDA currently at 88 MMT). Argentina is also enjoining better weather conditions.  There is some talk that central and southern Argentina might start to complain about lack of moisture in the coming weeks but as of right now it doesn't appear to be a headline that is going to rock the trade. With record acres going in the ground and good conditions in South America, it makes it hard to imagine new-crop soybean prices rallying back above $12.00, in fact the $11.75 area is starting to look like a bit of a stretch.  I continue to worry about ongoing new-crop risk.  Those holding more of this years soy production need to start thinking about getting a floor locked in place while price levels remain above $13.00. I am not saying the bull run in the front-end is complete over but why press our luck with no safety-net in place? Best of practice at this point is probably using some type of put strategy to get the flat-price hedged just in case the Chinese pull some type of "Crazy Ivan"....Click here to get my daily market comments....

Bullish Soybean Cards left in the Deck...

Dec 02, 2013

If we run into any type of major production hiccup in South America during the next few months bean prices in 2014 could push much higher.  On the flip side, if the weather cooperates in South America, and producers planting record soybean acres, we might soon find ourselves swimming in a glut of surplus.  As each day passes and more acres go in the ground in South America, with very little sign of a major weather hiccup, you have to be more concerned about the downside risk associated with an additional 15 million metric tons of production hitting the marketplace in 2014/15. Lets not forget we are also thinking a similar scenario could play out here in the US where producers lock in prices and switch more production acres to soybeans.  Do I like locking in ALL of my 2014 production at these levels? Certainly not, but I do think you need to have some type of protection in place on a good size portion of your estimated production.  Anything is still possible in South America??? There could be problems during the growing season. There could be flooding problems during harvest. There could be political issues, labor strikes and logistical problems that keep the crop from getting out of the country or to the ports.  

Keep in mind, the World Cup soccer games are scheduled to be played in Brazil this summer and from what I am hearing the roads and construction have become a huge mess. Lets also think about how many people have been pulled out of the Ag labor force to help the country get ready for this major world event. From my perspective this means fewer available laborers in the fields and at the ports to help harvest and transport the upcoming corn and soybean harvest.  Certainly not trying to discredit the possible downside exposure that exists in the back-end of the bean market, but just wanting to point out not all hope is lost for those holding out for higher prices. Demand remains strong and currently supplies are tight, there are several dynamics and catalyst that have to play out still for prices to collapse, so place your bets accordingly.        Click here for all my comments.... 

I suggest carefully monitoring and adjusting your hedges and overall exposure as "risk" to the South American crop starts to come off the table. Just remember, as the market becomes more and more comfortable with the "weather" and South American yields, 2014 prices are almost certain to tumble further down the hill. 

Latest South American Update: I am hearing more soy acres have been going in the ground over in Argentina than what analyst in the area had originally anticipated. Yes, there are significant planting delays, but with planting being pushed so far back in many locations more and more producers are being forced to switch some intended corn acres to soybeans. Currently the USDA is estimating Argentine soy production at 53.5 million metric tons, while several sources inside the country are now thinking the crop will be more like 57-58 million metric tons (maybe even higher).  I am also hearing talk and plans from producers for more second crop soybean acres. In turn several analyst are now starting to work their Brazilian production estimates higher. The USDA is currently estimating the Brazilian crop at 88 million metric tons, while several sources are pushing their estimates to between 90 and 92 million.  Hard to imagine, but many insiders are reporting 110-120 day beans look as if they will easily yield 100 plus bushels per acre. Remember, we are probably just 30-45-days from seeing full-season beans coming out of the ground in Brazil.  Point I am tying to make is that "risk" could start coming off the table quicker than you might think...Click here for all my daily comments...

Log In or Sign Up to comment

COMMENTS

Receive the latest news, information and commentary customized for you. Sign up to receive Dairy Today's eUpdate today!

 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions