Grain Market Viewpoint

Soybeans Are Down But Not Out Yet!

I see no real way for Brazilian corn AND soybean imports to have a major impact on U.S. old-crop prices during the coming few months. Yes, a few extra cargoes here and there will help to some degree, and provide some short-term bearish headlines, but I doubt it does much to solve the extremely tight U.S. inventory problem.

Soybean bears continue to question the recent rally, especially in new crop. Many sources close to the trade thinking spread pressure and unwinding is a major part of the reason. For the past several weeks spec-money has been playing long both corn and wheat against short soybean positions. Now all of a sudden it looks as if a large majority of the corn is going to go in the ground and fewer overall corn acres are going to be lost or switched to soybeans. Some much needed rainfall in Southern Russia is also causing some of the wheat bulls to rethink price appreciation.

Moral of the story: nothing has really changed in regard to the negative fundamental outlook for new-crop soybeans other than the fact traders may not be as bullish new-crop corn or wheat as they were a couple of weeks back. Therefore liquidation of the long wheat and corn side has caused pressure, while buying back shorts on the bean side has caused a rally. I am certainly not discounting the fact old-crop tightness has has helped pull prices higher as well, I am just pointing out there could various unforeseen events taking place behind the curtain that is also helping to fuel the recent rally.

South American supplies will NOT be able to help overall shortages in both US corn and soybeans. I have had several subscribers ask me about Brazilian corn and soybean imports and how they will effect the US market. Heres what I have been hearing and I how I see it playing out.

  • Brazilian soybean crop is late. Both on the planting side and harvesting side, therefore soybean exports will run beyond their normal time frame.
  • Soybean quantity is much greater than last year. Meaning, they have more soybeans to export this year compared to last. This will also extend the overall length of their soy export program.
  • Traditional soy export season extended three to four months. Exports traditionally ending in early September will more than likely extend thru late November or early December.
  • U.S. exporters concerned. With Brazilian exports extending well beyond their  traditional time frame and Brazil's 2014 soybean crop set to come out of the ground just a few weeks later, the U.S. export window is shrinking.
  • Logistical infrastructure in Brazil limits exports. Because of limitations, both soybeans and corn can not be exported in large doses at the same time. Therefore the trade is curious in regards to just how much of either will be available to U.S. importers.
  • Second-crop corn in Brazil will start to be harvested next month. But with so many soybeans to export, the trade is starting to think Brazil's corn exports could be pushed to the back burner.
  • Corn exports in Brazil pushed back well into the early part of 2014. To what degree and magnitude remains the question. Traditionally corn exports out of Brazil would pickup as soybean exports wind down. This year that won't happen until late in 2013, hence corn exports will be extended.

 

Read my entire report.

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