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Soybean market volatility

Agriculture.com Staff 11/13/2006 @ 10:21am

Strong buying prior to the USDA reports suggested there may be a friendly surprise. The reports were supportive, but there were not any major surprises. Initial price movement after the reports suggests the market viewed the numbers as old news, as the reaction had prices moving lower.

First we will start with corn. Production came in at 10.75 billion, or closer to the 150-152 yield that we have been suggesting for months. Inconsistent yield results suggested that the previous estimate of over 154 bushels per acre was probably too high. This month's estimate of 151.2 is more in line with our expectation. With production at 10.745 billion, this leaves carryout down to 935 million after subtracting all usage. This is less than the October estimate of 996 million but slightly above the pre-report estimate of 925 million.

Soybeans: Production was pushed upward to 3.204 billion, versus last month's estimate of 3.189 billion. However, the production estimate was slightly below the pre-report estimate of 3.235 billion. Carryout edged upward 10 million bushels to 565 million but was less than the pre-report estimate of 585 million. Bottom line, while slightly supportive, the report also confirmed record carryout and more than adequate near term inventory. South American expectations were unchanged, and world carryout was virtually the same at 55.22 million metric tonnes, versus the October estimate of 55.06.

Lastly, wheat saw little change, but the reports did confirm tight supplies. Projected carryout is 418 million, the same as last month and below pre-report estimates of 425 million. World projected carryout dropped from 119.3 million down to 118.83 million metric tonnes. While slightly supportive, the market also viewed this as old news. Prices sold off after the report was released.

Bottom line, the markets confirmed tight projected carryout for corn and wheat, while soybeans remain adequate. However, the fortunes of the bean market can change within months because of two crop years, one in South America and then here at home next summer. Be prepared for high volatility.

Have a balanced approach that makes sense. Be sure you are well aware of the marketing tools available to you and know how to use them. Use them to fit your needs helping you maximize gains and reduce risk. Focus on a balanced approach that has you making smart business decisions. Trying to out-guess the markets will be difficult.

If you have any questions or comments or want help developing a plan for these volatile markets, please contact Top Farmer at 1-800- TOP-FARM, ext. 129.

Strong buying prior to the USDA reports suggested there may be a friendly surprise. The reports were supportive, but there were not any major surprises. Initial price movement after the reports suggests the market viewed the numbers as old news, as the reaction had prices moving lower.

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