Old-crop soybean story is weakening
Soybeans: In the exports paragraph we detail how the "old crop demand story" is still alive but likely after the next supply/demand report it may be finishing up. Also, keep in mind, if there is any switching in acres due to delayed planting, which will be talked about in the second half of June. At this point, we would only imagine North Dakota being the main delayed planting state making those plans.
Soybean Exports: After nine weeks of huge sales for this time of year, this morning's report showed the first chink in the "old crop demand story". This morning's report indicated old crop sales last week only totaled 9 million bushels. That was right next to the "normal" 8 million bushels at this time of year. So, the "old crop"-based bull story is starting to weaken. However, the sales in the nine weeks previous were so large that we are clearly above USDA's pace. If we only run at the "normal" rate from here on out, exports will total 1.291 million bushels. That is clearly above USDAâ€™s 1.240 million! Can we take a 50 million bushel hit to our measly 130 ending stocks? No. That is why in the coming weeks we will likely see old crop exports fall below last year. We are finally reaching the point where prices may be curbing demand. That's the exact purpose of a market, to find "true value". Now making it clear, USDA will increase exports next month, likely to the tune of 20 to 35 million bushels. It will be bullish and prices may stay right here if not continue to moderately rally. In other news, we can report new crop soybean sales are still strong. We now have 138 million pre-booked which is above the "normal" pace of 95 million at this time. Overallâ€¦exports are still a bullish factor for soybeans. That bullishness however, may be fully priced after the June 10 supply demand report.
Direction: This market is still bullish and we will not attempt to pick a top. This week's close was the highest yet of the uptrend. For hedgers, we are still satisfied with our limited 30% hedge position. Producers benefit from the upside move on up to 1100 basis the November. If new crop futures can hit 1100 in a year when new crop ending stocks will easily doubt when it's all said and done, that is not a bad price at all. We may take a look at stepping up that new crop coverage in the coming weeks before the June 30 acreage report.
Trade Idea(s): (05/20) Buy Jul 1124 1/2, risk and reverse 1100, objective 1220. Option Strategy(s): (05/14) Sold Jul 1040 put 16 3/4, risk at 16, objective 0. Closed 3 1/4. Soybean Technical Commentary: Beans created a double bottom with yesterday's low today, and remain in a solid uptrend. Resistance is at Wednesday's high of 12.00 3/4 and then at 50% retracement at 12.23. We remain short the 10.20 put to stay long.
Vital Technical Indicator: the next projected major turn day for soybeans is tomorrow, soybean meal is tomorrow, and soybean oil is June 4.
Hogs: A representative of the US Meat Export Federation has confirmed Mexican health authorities are stepping up their inspections of US pork. At this point, we have no idea why they are doing this as pork in the US and also Mexico has not been shown to pose any health risk due to H1N1. Either way, it is yet another slap in the face to the US pork industry. So, pork exports to Mexico were down anyway as their consumers are still slowly recovering from pork fears. Russia, China, and other countries still have their complex mix of partial pork bans in place and have made no indication it will change. Instead of cash hog prices slowly recovering in the coming weeks, with the new Mexico news there is almost no reason to expect they will move higher at all. Cash hogs are at $59ish view the Lean Hog Index. Is there any reason to assume they will rally to $63.92 by June 14, as the June futures are implying? Yes, at some point our pork buyers will change their tune. For now, we will assume that will not be until the end of summer. Personally, we feel these export restrictions are completely ridiculous and have extremely strong feelings that our case is not being presented correctly to our trade partners. Without this H1N1 fiasco, and our weak willed negotiators, we should be at $75 and our producers should be making a moderate amount of money, finally. However, we have to be realistic and understand things are the way they are. With that in mind June, July, and possibly even August are now overpriced by $2 to $4.