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Soybean market bottom?
Soybean prices have moved sharply higher the past seven days, gaining $1.20 in a
short period of time as harvest delays have the attention of the market
fundamentalists. Technically, soybeans rallied above the recent high, and now
with an upside weekly reversal last week technically soybean charts look like
they also have bottomed (along with corn and wheat). That's quite a turnaround
from just eight days ago, when soybeans were running to new lows weekly.
To turn the market around before much harvest is complete is quite a task for
the market, but then again the harvest delays have become numerous around the
US, with us having only 23% harvested vs. 49% last year and 57% average. The
delays are starting to get some real attention, and combined with a strong
outside market situation (new all-time gold highs, a shrinking dollar, and
soaring stocks)- soybeans are getting downright bullish!
One has to wonder about the outside market signals -what they are really telling
us is that the US and world economy is on the rebound! Perhaps our financial
crises is finally behind us, and may the good times roll - happy days are here
In addition to harvest delays, strong outside markets, and a bullish technical
situation, Pro Ag yield models are also indicating some friendly news for
soybeans. In mid-September that yield model was topping out at 45.6 bu/acre -
much above the upward revised October USDA number of 42.4 bu/acre. But since
mid-Sept., the Pro Ag yield model has dropped about 1 bu/acre down to 44.5
bu/acre. That bushel decline is very unusual for the period of Sept 14 to Oct.
12, and represents a potential loss of about 77 mb of soybean production. So
the Pro Ag projected carryout likely dropped from 300 mb to 230 mb (equal to
USDA), putting a less bearish outlook on soybeans. The market has taken a more
bullish outlook, and some speculate that soybean yields are likely to drop now
from the 42.4 bu estimate. Maybe, or maybe not!
Or is it possible that soybean yields, if harvest ever gets going, will turn out
to be better than 42.4 bushels per acre? If so, there might be some setback
of prices but for now the assumption seems to be that the bottom is in the
market. But can we test close to the old lows again (around $8.85)?
It's interesting to note that soybean prices rallying during early October will
have an impact on CRC/RA/GRIP price discovery. As it turns out, the base price
of $8.80 will turn out to be less than the actual harvest price. Soybean
insureds who have a claim (Prevent plant or otherwise) will receive an
additional check (with RA/GRIP only if they chose the harvest option). This
does have an impact on those with yield losses, as the settlement will be at a
So as we end the insurance year, soybean prices are jetting higher. Can we hold
these levels? Much might depend on the economy, the dollar value, and
inflation worries as we move ahead. If crude oil, gold, silver, stocks continue
to go higher and the dollar lower, maybe soybean prices are off to the races.
But a setback in these outside markets, along with a clearing of weather
forecasts that could allow harvest, could put some pressure yet on soybeans as
we enter late October/November harvest. Better than expected yields (which seem
less likely with every harvest delay) also could pressure prices yet. But the
polish on the bearish side of the argument for soybeans has, like corn and wheat
before us, slowly metered away from people's expectations.
Perhaps those expectations will be right. After all, the corn and wheat markets
did follow through on their market rallies after technicals indicated a bottom
was in place. For corn, that was no small accomplishment considering a record
large yield is projected in 2009. It's not often that record large yields and an
80c harvest time rally are mentioned together when talking about the corn
market. But then again, markets love to do 'new' things to keep us all on our
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Soybean prices have moved sharply higher the past seven days, gaining $1.20 in a short period of time as harvest delays have the attention of the market fundamentalists. Technically, soybeans rallied above the recent high, and now with an upside weekly reversal last week technically soybean charts look like they also have bottomed (along with corn and wheat). That's quite a turnaround from just eight days ago, when soybeans were running to new lows weekly.