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Sharply Lower Soybean Pricing Ahead, Says Analyst

If you were trying to show students how exciting commodity markets can be, today would not be a good day to start. Averaging the change in front beans (+1.5) with front corn (-1.5) would give you sharply unchanged markets. We may well continue to be constrained right up to the 3/31 USDA planting survey, and it is still a bit too soon to place any chips on Midwest planting weather. As far as harvest in South America, no weather complications there to speak of. Beans continue to be loaded, but the pace of farmer selling is only moderate. If this continues and funds continue to ease out of soy, the road ahead will be heavy without a perceived weather issue here. Exchange and private forecasters both continue to nudge up the South American harvest.

Given the anticipated increase in soy acres this spring, bulls will be counting on a trendline (47.1) or lower yield nationwide as an offset to an increase in ending stocks. Splitting the difference from that 47.1 and this year’s 52.6 gives us 49.8, a level which would boost ending stocks by 100 million bushels.

We suggest soybean export sales are on target for USDA’s current export goal and no adjustment will be needed. With both the world as well as the U.S. balance sheets expected to grow over the coming months, it will be hard for rallies to be sustained without a major weather issue. We suggest this market is on the path to hit $8.84 for the early-summer low basis the November contract. We do see a good chance for a rally in the July/August time frame, (one that does not hold), but our key focus is on the sharply lower pricing to expect over the next three months.

We continue to urge sales on all remaining old crop and work on new crop on any bounce that might materialize.

 

Rich Nelson
Allendale Inc.
815-578-6161

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