Plenty of room for soybean bulls
A couple of days of double-digit gains in the soybean trade fueled by new export sales potential could be tipping the acreage battle scale in that crop's favor over corn, at least for the acres where a potential switch can still be made.
"We think we'll buy up to 2 million double-crop soybean acres," says Don Roose, trader and analyst with U.S. Commodities in West Des Moines, Iowa. "There's probably half a million corn acres that will move to beans."
Though corn's been selling like hotcakes in the last few days on the export market, traders have taken profits, yielding about all the upward momentum to the soybean complex, which has seen double-digit gains each day this week based mostly on continued news that South America's crop will be short.
"We don't know where we're headed. The crop in South America does continue to sink," Roose says. "It's the job of the market to dial in the price of the crop. You have a shrinking crop and China's still buying beans. It's all about technicals and we're at contract highs now."
Under current conditions, will the upward trend continue? Roose says it's likely that if futures reach the $16.50/bushel level, China's pace of buying U.S. beans will slow or stop altogether. And regardless, it's inevitable the window closes in the next few months, especially when South America's second soybean crop hits the market.
"In short crops, you usually put your top in around the middle of harvest or at the end, and Argentina's about halfway done with harvest. It's not like we're pitching a shutout here," Roose says. "Short crop, long tail."
But even if China trims its buys on the export market and this scenario plays out with the market's top soon, there's still a major variable in play that could turn those potential bears into bulls.
"We haven't even talked about the weather in the U.S. yet," Roose says. "We're talking right now about the market dialing in another million acres of beans and trendline yields. What if we don't? Then, it's like we're in the wheat market in 2008."