Still bullish corn futures
Soybeans, What Did We Learn?: the following is a brief accurate description of what Allendale In presented at its 18th annual outlook conference on Saturday Jan 19th "Today's Reality-Tomorrow's Opportunity". Allendale projects 6 million more acres to be planted for the 2008 harvest vs 2007. Allendale uses a projected yield per acre of 42.3 bu per acre to arrive at 2.906 billion bushels and by adding in 2007/08 carry in stocks, arrives at total 2008/09 supply of 3.091 billion bushels. Nearly 98 mil bu less use than 2007/08, estimates 2008/09 end stocks of 196 million bushels vs 177 million bushels for the present 2007/08 marketing year. End stocks to use of 6.8% would compare to 2007/08's 5.9%. Allendale estimates the 2008/09 Season Average Farm Price at $10.25 vs 2007/08 $10.40. Where you would normally view our morning "Weather Watch" page we invite you to view the use of various feed stocks for biodiesel use have reduced. Ironically the peak use was reached nearly the same time when soybean oil futures began to rally. It is estimated biodiesel plants which purchase its raw biodiesel feedstock are now running at 24% of capacity utilization. The break-even on soybean oil to manufacture into biodiesel is estimated at 38.5 to 39 cents per pound. The present cash price for soybean oil is running 50 cents per pound.
Soybean Fundamentals: unlike corn or wheat, there is a fresh world supply in the making and just down the road in South America. The Brazil Real vs the US Dollar is held in a 1.72-1.85 trade range and nearly 20% less than year earlier levels. Foreign demand is likely to monitor these two developments and ultimately transition from US soybean supplies to South America supplies. There is at present a small build on the bullish side for soybeans as the perception within Argentina its crops are under stressed because of dry weather. At present we are cautious to such perception.
US Census Bureau Crush: the small picture suggest Thursday US Census Bureaus month of December soybean crush data is bearish to old crop futures. We would agree IF you compare the actual results to the pre release estimates. Allendale prefers to look at the big picture. The big picture says at 162.4 million bushels of soybeans crushed for the month of December are better than the previous months 155.7 million bushels and better than year earlier level of 157.4 million bushels. USDA estimates a 2007/08 market year crush level of 1.83 bil bu vs last years 1.806 bil bu. Based on the performance of the first four months of data, Allendale suggest the crush pace may be more in line at a level of 1.845 billion bushels.
Weekly Export Inspections: thus far in the marketing year, cumulative 2007/08 soybean inspections are 8% weaker than year earlier levels. This is disappointing as we approach the South America soybean harvest.
Cash Peak: Dating back to 2000, odds favor a national cash soybean peak for the months of August, December and April.
Old Crop Marketing: the March-May soybean spread is at 18 cents carry. The cost per month to store soybeans at a cash level of $11.10 is 12.25 cents for the Mar-May. Our old crop 70% remaining hedges are in the March futures. If you are not hedged, make certain your local cash market is at least offering carry to store. If you are bullish, sell the soybeans and replace inventory with futures and or May call options. Ask your Allendale Representative to run the Allendale Evaluator for your specific operation.