The other potential bullish factor is demand. Unlike many other commodities, sticker shock has not been a factor – yet. US export commitments stand at 21.4 million tonnes, well above last year at this time when sales were only 15 million tonnes. The USDA actually lowered its estimate for 2012-13 exports by 1.5 million tonnes, or 5%, from its August estimate, to 28.71 million tonnes. This compares with last year’s final sales of 37.01 million tonnes. The USDA estimate is more of a reflection of how much the US can sell, rather than demand.
Global ending stocks for 2012-13 are currently forecast at 53.1 million tonnes, or 20.6% of usage. That’s right on the border – anything lower than that has sparked multiyear bull markets in the past. To be sure, the US crop will still be significantly below the average of the past few years, even with the improved weather.
When prices approached $18 per bushel, however, the market was pricing a total disaster. Any further reduction in yield would have sent US ending stocks below 100 million bushels. With a more optimistic outlook for the crop, the market is now re-pricing the drought’s impact on soybean supply. The size of South American crops is important and the extent of weather related problems is not yet known. In all likelihood, with the expansion of acreage, production should still be sufficient to compensate for the US crop – even with some weather problems.
Still, unexpected strong demand and the South American situation remain strong variables. Remain long. Maintain stops recommended on Aug. 31at $15.40, close only.