Soybeans lack conviction
The soybean market started the week trading on a choppy note today as it felt like neither bulls nor bears had much conviction to push the market one direction or another.
Some traders are talking up production issues in SA but I really don’t see much of a problem. The latest USDA Brazil crop estimate is a 95.5 mmt crop. Last year’s crop of 86 mmt was a record crop at the time. World carry-out numbers are currently estimated at 90 mmt which is also a record so how much of a problem is it if we lose a few mmt? Not much in our opinion.
We view South American weather bearish as Southern Brazil will see moderate to heavy precipitation this week. The North will also see normal to above normal rains over the next 10 days. Argentina will see moderate precipitation this week. We are also about past the key yield determination time for Brazil’s crops so weather should be having less impact on the market direction over the next few weeks. Ag Rural is reporting that 6% of the Brazil crop has been harvested which is up 4% from last week. They also reported that farmers have sold only 33% of the coming soybean harvest. That is only slightly over the 31% from last month but is behind the 49% five year average sales pace.
Friday afternoon’s weekly Commitment of Traders report showed Managed Money continues to sell beans. For the third week in a row, funds were net sellers of soybeans selling -25,482 contracts between January 20th and 27th. The funds are now net short 33,021 contracts. This is very close to their low point in September when they were short 39,786 contracts.
The weekly export inspections for the week ended 1/29 showed that we shipped out 62.4 million bushels of beans. This was above the trades estimated range of 42 to 48 million bushels. We have now shipped out 1.377 billion bushels of beans this marketing year. This is the time of year shipments tend to drop as imports shift their demand to SA origins.
Allendale anticipates the bean market will continue to come under pressure over the next few months and rally attempts will be and should be met with more aggressive selling by both speculators and producers. Our price projections are for the November soybeans to grind down to the $9.21 level into June then rebound back to the $10.21 into the latter portion of the summer before falling to $8.07 into harvest.