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AG TIME - Bear on the Move by John Walsh

Published on: 13:47PM Jun 14, 2018

The soy was led lower by beans and meal yesterday. After review of the USDA report yesterday. I must say that I was not bullish the bean numbers. To the contrary. I see some real potential mistakes. First, it is probable that the USDA has over stated the exports by 50-100 mil bu. I don’t buy the story the Chinese will take 6 mmt more next year. Not because of the tariffs either. Because I think they have reached a saturation point. Second, most private analysts expect an increase in bean acres of approx  1 million. This, added together, puts the domestic carry at approx 500 million. We have plenty of beans. We have had for some time. Beans equal meal. That is the reason for the decline in meal. In addition, the currency market has changed to the point the South American farmer is in a financial position to sell his beans and continue to expand acreage. This will ultimately create a competitive situation. In my opinion we may be starting a bear market in soy. As I have said, rallies are a hedging opportunity.

The corn just hung around yesterday. This is a victory given the significant break in the beans. The fundamentals are friendly. The global carry continues to decline. It is my belief we will experience more declines in the Black Sea region (counting Russia in that). In addition, further declines in Brazil corn production are likely. This opens the door for US exports. The main point: corn has no room for error in production. The market will need to dial in some risk premium. Especially given the current carry.

Thank you to everyone for the nice comments/questions. To discuss long term outlooks   800 993 5449