Soybean traders are asking how we are going to continue feeding the bull? Especially when you consider we just set new record high crush, record exports, etc. The question is, can we continue to post NEW records or have we peaked? Will China make "cancelations" or continue their buying frenzy? Keep in mind China, over the weekend, made it official that they will be doing away with their guaranteed minimum price program. As you can imagine, the knee jerk reaction is bearish, with most in the trade believing this now allows domestic Chinese to fluctuate lower than they have ion the past.
On the bullish side there were rumors late last week circulating that China was looking to buy U.S. beans off the Gulf in Feb/Mar…keep in mind this is NOT normal behavior for the Chinese. Generally their interest would switch exclusively to Brazil. Another rumor floating around was that beans from Paraguay might soon be making their way to the east coast of the U.S.
Moral of the story: Supplies are definitely tight, China appears to still be looking for more US beans, domestic crush is strong and therefore old-crop prices may continue to move higher despite the overnight knee jerk reaction to the downside primarily driven by rains in Argentina and Chinese policy changes. Producers should continue to keep $13.00 hedges in place with a cash-sale price target just north of $13.50. I want to keep the hedges and floors in place because I am a little nervous about Chinese soy demand moving into and just past their Lunar New Year holiday, which begins in less than 10 days. Traditionally their soy demand has faded moving into this 15-day holiday celebration…Just another moving part to keep our eye on.