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$14-$15 soybean range?

11/14/2012 @ 11:11am

With the soybean market taking off nearly $4.00 per bushel in the last 3-months, marketwatchers wonder if the bearish outlook will be turned around while farmers scratch their heads about pricing more old and new-crop earlier than they had planned.

First things first. What is making this market so bearish? A lot of factors, according to Anne Frick, oilseeds analyst with Jeffries Bach.

"What's grabbing the headlines this week, is the bearish USDA data released last Friday that upped U.S. and world soybean production and supply estimates," Frick says. 

For those interested in accounting-like ways of keeping track of the supply/demand picture (translation: here comes a bunch of numbers), Frick says the soybean numbers to look at appear on both sides of the ledger.

For the U.S., the USDA added 375 million bushels, or a 13% increase, to the 'supply side' of the balance sheet,

since its September Crop estimate. Short-term, the extra supply is bearish to the market. 

However, the U.S. total soybean supply is only 5.0 million bushels above last year's use. As a result, the U.S. still needs to ration usage, Frick says.

"We have to cut usage by 125 million bushels vs. a year ago to secure a carryover of 130 million. Our usage for the first two months of the marketing year is up 151 million bushels. So, you have some significant usage rationing for the year. I suspect we will push that rationing into the spring months," Frick says.

The current strong export pace, highlighted again Wednesday with China buying 120,000 mt of U.S. soybeans for 2012-213 delivery, isn't helping cut usage.

This sale to China might have surprised some, due to that major Asian buyer booking large amounts of soybeans earlier this year.

Dustin Johnson, ehedger grain analyst, sees the market in a liquidation mode and seems to agree that export demand will substantially slow down in the coming months. "The most important factors to watch, in my opinion, are export bookings between now and the January reports, as well as the January stocks number.  If this most recent price setback creates new interest in US soybeans again, we will probably have to switch back to rationing mode," Johnson says.

Considering that November is a time when daily U.S. export sales are expected, this year's seasonals are being knocked off of their pace, due to China booking soybeans early.

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