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Soybean production, demand raised

11/09/2012 @ 3:37pm

Soybeans

Broker Perspective: The USDA gave the bean bears something to cheer about today as they raised the national bean yield higher than expected. They did give the bulls some hope as they raise demand high enough to offset most of the increase in production. They raised the national yield 1.5 bushel/acre which was much higher than the expected 0.4 bushel upward revision. The national yield is now 39.3 bushel/acre. This is only a 6.2% drop off from last year’s 41.9 bushel/acres yield which is pretty amazing considering the magnitude of the summer’s drought. The crop is now estimated to be 2.971 billion bushels, up 111 million bushels from the October estimate. Offsetting the raise in production was an increase in demand. The USDA raised exports by 80 million bushels, bringing total exports this year to 1.362 billion bushels. The crush was also raised by 20 million today. The net result of these revisions was that ending stocks were revised up to 140 million bushels. This leaves the U.S. stocks to use at 4.6%, up from last month’s 4.5% number but below last year’s stocks to use ratio of 5.4% World ending stocks were also increased this month. World ending stocks area now projected to be at 60.02 mmt leaving the world stocks to use ration at 23.0%. With the market trading a shade above $14.50, beans are looking a little under value. With a bulk of the South American growing season left, weather could still have a big impact on their crop. If the market breaks down to the $14.00 to $14.25 level, we would recommend end users secure some of their needs in case the South America weather turns for the worse.

More Breathing Room: Both of USDA’s moves on the domestic side were warranted. Production was raised but at the same time they respected the very strong short term demand.

Trade Recommendations:·      

11/6 Stand aside.

Lean Hogs

USDA lowered its estimate of 2013 pork production by a small amount today. On the October report they were seeing a 1.3% reduction next year. Today they revised that down to a 1.4% decline. They suggest the production decline next year will be noticed from the second quarter on out. This is also important to consider as the summer months are where the tightest supplies of the year appear. For the short term action look for hog slaughter to post a slight rise from here and make its normal peak for the year around the first week of December. Futures for the most part have this factored in. We turned neutral on this market Tuesday afternoon and will hold that viewpoint for likely another two weeks. Our next long term trade will be to go bullish with a focus on the summer 2013 contracts.

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