Soybean bulls continue to talk about the current USDA estimates being too high for new-crop production. Not only do they believe the acreage number is high, but also firmly believe the 44.5 bushel per acre yield is overly optimistic. The folks over at Lanworth seem to be in agreement, lowering their most recent soy production estimate by 45 million bushels, down to 3.315 billion in total production vs. the USDA's current estimate of 3.420 billion bushels. I am not saying whether they are right or wrong, but if you start whacking 100 million off the production number, I can assure you the trade is going to start getting real nervous staring at another sub-200 million bushel carry. Keep in mind, all it takes is the current USDA yield of 44.5 bushels per acre to drop to 43 bushels per acre and the Lanworth estimate becomes right on target (assuming the USDA's harvested acres of 76.9 million holds up).
As I mentioned up above the bulls want to argue the "yield" will be more like 41.5 bushels and "harvested acres" will be closer to 76 million due to late planting and fewer double crop beans going in the ground because of the late wheat harvest (thoughts are of the 8 million double crop acres, 1 million never got planted, and others may produce poor yields). If this plays out, then all of a sudden we are looking at total production of around 3.15 billion and the potential for a NEGATIVE ending stocks number! The problem is if this does happen, prices would rally to more extreme levels and quickly start to ration the current optimistic USDA demand estimates, hence ending stocks would not end up in the "red." It would however give producers an opportunity to price more new-crop soy at better profit levels. If your waiting to price more bushels and reduce more new-crop risk, like I am, then this is what we are cheering for. For those who are short call premium, banking profits and moving to the sideline sounds like a safe bet, at least for the interim. No I am not turning wildly bullish soy, I am just letting you know what cards we need to see come out of the deck to get higher prices. And we need this to happen sooner rather than later. Several very reliable sources in the trade are still predicting sub-$10 soybeans by October. Therefore keep your hedges in place.
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