Soybean Prices Attempt $10 Test And Fail

October 12, 2017 12:57 PM
Money Cash Dollars

Soybeans stole the spotlight in USDA’s Oct. 12, 2017, supply and demand reports as prices rallied as much as 32 cents per bushel. The spike came on a surprise cut to the average national yield of nearly half a bushel—now at 49.5 bu. per acre—and increased harvested acreage, which rose by 800,000 acres.

At the same time, soybeans tried and failed to cross the $10-per-bushel threshold.

“USDA gave us the exact same production number as last month,” says Mike North of Commodity Risk Management Group. “When you pair that with lower beginning stocks [down] 44 million bushels, we end up with a smaller balance sheet.”

The market will continue to digest the numbers and the implications of butting up against resistance at $10.  “Today’s settlement will be critical,” North says. “There are plenty of things to watch going forward.”

Producers “should be sellers of cash soybeans,” says DuWayne Bosse of Bolt Marketing. “If they are getting high yields in their fields, take advantage of this spike-up. It’s friendly, but we don’t have to go flying up to $10.50” to make sales.

Meanwhile, USDA left corn ending stocks virtually unchanged. The crop lost some acres and gained yield for a national average of 171.8 bu. per acre.

“It didn’t get all those friendly surprises,” North explains. “It had quite the opposite, in fact. Corn had a higher yield estimate than the highest analyst guess. It was helped, like soybeans, by a smaller beginning stocks number.” USDA took 55 million bushels away from corn beginning stocks.

“Corn is just tagging along for the ride,” North says. “It doesn’t have a good story to tell.”

That could change depending on conditions in South America, where dry conditions that could damage second-crop corn, known as safrinha, are creeping into northern Brazil. “Two years ago, we had the same drought setup in Brazil,” Bosse recalls. “It hammered that second crop. Drought is more bullish corn than soybeans. The problem is we have corn literally coming out of our ears in the Midwest, so it’s hard to get very bullish right now.”

Even in the Dakotas, where Bosse farms, yields  are far better than expected earlier this year amid severe drought conditions. Timely August rains and a beautiful September set the stage for production Bosse thinks will be just under that of 2016.

For both crops, USDA continues to project strong domestic and export demand. Traders have begun shifting their eyes to South America and the weather market they agree is underway. 

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