"Better-Than-Expected" U.S. Soybean Yield, Record South American Crop Prospects Weigh On Soybean Futures

October 3, 2012 01:16 AM

What Traders are Talking About:

* FC Stone raises crop estimates. Brokerage firm FC Stone estimates corn and soybean production higher this month than in September based on a survey of its clients, early harvest results and other factors. The firm now estimates the corn crop at 10.824 billion bu, with the national average yield at 123.9 bu. per acre and the soybean crop at 2.849 billion bu., with the national average yield at 38.2 bu. per acre. In September, FC Stone forecast the corn crop at 10.607 billion bu. on a national average yield of 121.4 bu. and the soybean crop at 2.739 billion bu. on a national average yield of 36.7 bu. per acre.

The long and short of it: The soybean crop estimate is getting a lot of attention and keeping futures in the sharp price retreat from the all-time high this summer. With reports of "better-than-expected" yields continuing to come in, traders are anticipating USDA will raise its soybean crop estimate in the Oct. 11 Crop Production Report.

* Brazilian soybeans off to favorable start. The soybean planting season in Brazil has been open for just a couple of weeks, but early returns are favorable. Recent rains have improved soil moisture in key growing regions ahead of the bulk of planting. Plus, Brazilian producers are expected to increase soybean acres this year. So far, roughly 2% of the crop has been seeded nationwide. Pro Farmer South American consultant Dr. Michael Cordonnier reports nearly half of the Brazilian soybean crop has been forward sold as producers look to take advantage of historically high prices.

The long and short of it: Expectations for record soybean production in Brazil and for all of South America is also keeping pressure on soybean prices.

* Macros still matter. Traders are keeping a close watch on Spain as the country is widely expected to seek emergency funding -- it's seen as a matter of when, not if. Traders are also waiting on minutes from the Sept. 12-13 Federal Open Market Committee meeting at which QE3 was unveiled, which will be released Thursday and dissected closely.  But the primary focus for many investors this week is the European Central Bank policy-setting meeting tomorrow and U.S. employment data on Friday morning.

The long and short of it: Investors are taking a wait-and-see approach when it comes to risk as they await key economic data and happenings the second half of this week.


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