With markets trending upward after USDA on Friday released projections for the biggest-ever soybean and corn harvests, some analysts are wondering how long soaring demand could keep markets bullish.
"I’m very surprised the market had a bullish reaction to a bearish yield forecast, and I’m worried the rally won’t last long,” said DuWayne Bosse of Bolt Marketing in Britton, S.D. “No matter how good demand is, we are going to have a lot of bushels on hand this winter, and that should keep a lid on grain prices this fall."
USDA’s record-breaking estimates put the corn crop at 15.153 billion bushels with a yield of 175.1 bushels per acre, and the soybean harvest at 4.060 billion bushels, with yield of 48.9 bushels per acre.
Demand has to stay strong to support a bullish market. “We will need to continue to see daily soybean sales announcements to continue to feed this bull market,”Bosse noted.
If USDA export projections are correct, strong demand should continue. USDA increased its 2016/17 soybean export estimate by 30 million bushels, and its 2015/16 export forecast by 85 million bushels. It boosted projections of soybean crushings by 15 million bushels and lowered old-crop soybean ending stocks to 255 million bushels from 350 million bushels.
Other analysts chalked up the market’s reaction to equally large crop production estimates by some researchers.
“It (the USDA report) wasn’t a complete shocker,” said Don Roose of U.S. Commodities. “We’ve seen this before,” said Roose, referring to INTL FCStone's production estimates that proved very close to USDA projections.
However, “when you look at yield, it’s still a question,” cautioned Roose. “Do you know (yield) before it is the of August?”
Analysts, such as Standard Grain's Joe Vaclavik, are also wondering if speculative funds could be driving the market into bullish territory.
In early afternoon trading Monday, September soybeans were up more than 23 cents to $10.22 while September corn rose more than 4 cents to $3.26.