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Soybean exports are off the charts

Soybeans continued to rally the past week, pushing past recent yearly highs of $13.80 in yesterday's close.  

This represents a new high for the year, and it's encouraging to market bulls as we still haven't solved the dilemma of selling 80 mb more than projected exports for the year, and we are only halfway through the marketing year! Obviously, the market needs to do something about this dilemma, and therefore the market is rallying to try to once again solve a problem that it did not create.  

The market is not rallying on a crop problem in South America, as weather there has been favorable through the pod-setting period for the crop.  

In fact, the weather has turned to a cooler-than-normal forecast for all of South America the coming week, alleviating crop stress on areas in southern SAM that had been under a little stress earlier this summer. In fact, rainfall amounts have been mostly above normal the past few weeks, and that forecast continues for much of the South American growing region.  

So, rather than crop stress pushing markets higher, it is the unbelievable strong U.S. export sales that have captured this market's attention. China has bought more soybeans from the U.S. than we can ship to them, and we are only halfway through the marketing year! 

The market senses that we cannot sustain this sales pace, so it is rallying to force the Chinese to cancel U.S. purchases and buy them from South American producers instead.  

The market must accomplish this objective, and the only question is how high the market must go to get this done. For now, we are not there yet, or we would be heading lower. Instead, the uptrend in soybeans continues, and that rising ship is raising all tides. (And other markets like corn and wheat also continue to rise.)  

Overall, it looks like the grains have turned trend to higher, and could march higher into spring. However, the spring rally will turn into a selling opportunity, as grains fundamentals will likely be more negative into harvest 2014 with normal crops or better. USDA weighed in on its first projections for the 2014 year, updating the baseline 10-year projections Friday morning.  

USDA projected planted acreage of 55.5 million acres of wheat, 92 million acres of corn, and 79.5 million acres of soybeans for 2014, about 1.1 million acres less than 2013. They project ending stocks of 587 million bu wheat (vs. 558 this year), 2.111 billion bu stocks of corn (vs. 1.481 this year), and 285 million bu soybeans (vs. 150 mb this year). 

That leaves prices at $5.30 wheat (vs. $6.80 this year), $3.90 corn (vs. $4.50 this year), and $9.65 soybeans (vs. $12.70 this year). Overall, they left a rather negative picture in traders' minds for 2014. The market for corn and wheat softened with these projections Friday and overnight, but soybeans remained strong with new recent highs in overnight trade. Soybeans broke above $13.80 overnight, still trying to solve the problem of too many export sales to the Chinese.

So, the bullish export sales of soybeans are pushing all markets higher, giving us a market rally in all grains as we head into spring. This is a nice time for a rally, as we are setting insurance prices for 2014 right now during the month of February.  

It looks like we will have decent price protection in place for 2014, with prices so far looking like they will be about $4.62 for corn, $11.34 for soybeans, and near $6.50 for HRS wheat. If USDA is right about their projections for 2014 at $3.90 corn, $9.65 soybeans, and $5.30 wheat, then the price protection from crop insurance could be worth something!  

For producers who have the fortitude to make sales after a late winter/spring rally led by soybeans, there also could be a reward for making those spring sales if USDA projections come true, and normal crops or better are produced in 2014.  

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