In a flash, the soybean(CBOT:ZSU4) bear market shook off recent selling and prices moved back up to week and a half ago levels. The initial thought process by many going into this week was that we would start our trek to fill the gap that occurred right after the 4th of July holiday weekend and we’d use the dry weather as an excuse to get us there. As it turns out, there was a lot more happening than just weather in the United States: China purchased nearly half a million tons of new crop from us, Argentina is on the brink of economic failure and export inspections came in above expectations, just to name a few.
The situation in Argentina is moderately supportive as they approach their default deadline on the July 30; the main concern is that the country will see a devaluation in their currency making it difficult for producers to conduct profitable business in the export market.
The healthy demand picture has certainly boosted the slight-bullish picture that the drier forecast has set up for us. However, we’ve known for a while that China would buy on a larger scale than previous years. Up 4 million tons from last year, the USDA expects China to purchase a total of 73 million tons of soybeans; we anticipate the U.S. to supply up to 40% of this. Because some of this has been known and likely worked into the price, weather remains the number once force effecting beans and any rain seen in the Midwestern forecast will add weakness as it will aid crop conditions.
Crop conditions were downgraded and are now rated 71% good to excellent and only 6% of the crop is considered poor to very poor. This time last year, the crop was rated 63% good to excellent and 9% poor to very poor. Contrary to a downgrade in conditions, the crop is blooming and setting pods at a quicker pace than what is average for this time of the year so the battle continues and we sit back and wait for the next weather report.