How High Can Soybean Prices Go?

Published on: 17:11PM Jul 12, 2012


Soybean bulls acted disappointed by the USDA's move to lower export estimates, I urge you to be careful if you are thinking this way. My take is the USDA has drawn a line in the sand basically proclaiming that 130 million is as low as the USDA is going to allow the ending stock number to drop. It will be the markets job to ration demand from this point forward, hence there simply won't there simply won't end up being enough soybeans around to export the amount they had previously estimated. I am telling you now before it is all said and done we will be importing soybeans from South America, more than likely by the April-May time period. My guess is Brazil will be importing soybeans from the US on a larger scale by the Sept-Oct time frame. I am already hearing stories about Brazil importing several cargoes of beans from Argentina, so in my opinion it's only a matter of time until substantial exports to Brazil start to show up on the radar screen. I am not exactly sure how we get there but $18-$20 new crop soybean price sound very realistic. I am also thinking 2013 soybean prices could eventually push to $15.00, so be patient pricing any more bushels at this stage of the game, I think there is still significant room to the upside.
As for today, big export sales data released this morning helped support corn. Soybeans also had good export sales numbers that continue to paint a picture of tighter supplies. There still remain many unanswered questions. Yes, the USDA made aggressive cuts in "yield," but... 
  • How much lower will "harvested" acres fall? My guess is by another 1-3 million
  • How much lower will corn "demand" fall? Several moving parts, but if need be, you have to believe the USDA could slash another 400 to 500 million. 
  • What about China? The USDA cut their Chinese corn import estimate from 7 million tons down to 5 million tons. I am not sure this is accurate, Chinese corn continues to trade at record highs and the country continues to buy corn. Something just doesn't add up here. Where there is some there is generally fire
  • How about grain production in Russia? The USDA made another massive cut down to 49 million tons.  Remember last month they went from 56 million down to 53 million, now they cut another 4 million. I am not so sure we have found the bottom, and I have to believe a lack of supply will really hurt Russian exports down the road. Kazakhstan production is also a big question?  
  • What about Ukraine production? The USDA currently estimates Ukraine corn production at 24 million tons while the trade is thinking it is closer to 20 million. Moral of the story, there may not be nearly as much cheap Ukraine corn to go around as some are thinking. 
  • The USDA is counting on a huge corn crop coming out of South America next year, but they are also counting on a huge soybean crop. In my opinion something has to give, and if South America runs into even the slightest production out!
  • The USDA is saying the world can essentially wait for South American soybeans to become available next year by lowering US 12/13 soy exports. I question this. With no global substitute for higher protein supplies, price increases may not be able to ration demand, therefore we maybe looking at a runaway train.


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