How Bullish Soybeans Am I?
Nov 28, 2012
Soybean bulls have been excited about rumors of Chinese crush margins turning positive, renewed Asian soymeal demand and prospect that the Bio-Diesel Blender’s Credit will be approved in the near future (retroactive). There is also excitement about the recent wave of US soybean oil sales, which most now believe are beyond the entire year's USDA estimate in just the first two-months of the marketing year. Most sources reporting US oil supplies now much more competitive to Argentina and Brazil than they were at the beginning of the month. If you recall, just a few weeks ago, US supplies were running about $15-$20 a ton higher than our South American competitors. Now all of a sudden we are hair cheaper for Nov-Dec shipments. To say the least we have definitely gotten more competitive. Several analyst actually believe soybean prices are still too low as traders are not taking into account the weather risk that is still lingering over the South American crop. Technical traders are also talking about the strong technical close yesterday, closing back above the recent high close set on Nov 12th at $14.48^6, somewhat squelching the theory of lower-highs and lower-lows. On the flip side the bears continue to question China's soybean imports, and if demand will be able to keep pace with the lofty estimates many have thrown out there. Remember, the USDA is currently estimating China will import 63.0 million metric tons, while several respected analyst now believe that number is closer to 60.0 million metric tons. Personally I am still looking for JAN13 soybeans to stay trapped in a trading range between $13.25 and $15.25, that is unless crop conditions in South America really begin to deteriorate. Then you have to believe the upper end of the range could be tested.
Looking into my so called "crystal-ball," I would have to suspect prices could continue to rally near-term, but if the weather becomes less of an issue in South America, prices will abruptly turn lower into the early new-year on fears of a huge South American crop and record US acreage being planted in 2013. After the market digest these possibilities, we should start to bottom out. My guess is we will turn the page in March, April, May and turn bullish once again on South American logistical issues, tight supplies here in the US, and uncertainty over US weather moving forward. If, and this is the big "IF," there is no major weather related hiccup (another 100 year drought or record setting heat), then it wouldn't surprise me to see soy prices will ultimately end up sub-$12 by the end of 2013's harvest. Obviously there would be many "ups" and "downs" and "what ifs" along the way. I just think producers should have some type of strategy or game plan in place to help protect themselves in case this plays out.
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