The following commentary does not necessarily reflect the views of AgWeb or Farm Journal Media. The opinions expressed below are the author's own.
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Soy bulls continue to point to almost unbelievably strong Chinese demand. With soybean supplies at the Chinese ports building and talk of importers looking to resell or roll a portion of January deliveries, you have to wonder just how much longer can the Chinese buy US soybeans? Keep in mind they have already purchased almost 5.5 million metric tons more from us than they did last year. In fact, there is now starting to be more and more talk of the US soon being "Sold Out" of soybeans. This is why I believe the front-end of the trade must somehow figure out a way to ration demand, meaning nearby flat-price and spreads have to keep doing their job. The back-end 2014/15 price risk still remains the same as Brazil's soybean planting season is running slightly ahead of schedule and is near 90% complete. The problem is growers in Brazil continue to report near ideal growing conditions. With good moisture in the forecast for the next couple of weeks and the harvest rolling in some areas during 30-45 days its tough to imagine a major weather hiccup at this juncture. If weather conditions continue in their current pattern a NEW record crop north of 90 million metric tons is almost a certainty (USDA currently at 88 MMT). Argentina is also enjoining better weather conditions. There is some talk that central and southern Argentina might start to complain about lack of moisture in the coming weeks but as of right now it doesn't appear to be a headline that is going to rock the trade. With record acres going in the ground and good conditions in South America, it makes it hard to imagine new-crop soybean prices rallying back above $12.00, in fact the $11.75 area is starting to look like a bit of a stretch. I continue to worry about ongoing new-crop risk. Those holding more of this years soy production need to start thinking about getting a floor locked in place while price levels remain above $13.00. I am not saying the bull run in the front-end is complete over but why press our luck with no safety-net in place? Best of practice at this point is probably using some type of put strategy to get the flat-price hedged just in case the Chinese pull some type of "Crazy Ivan"....Click here to get my daily market comments....
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