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Soybeans at all-time highs: Nov. '13

Soybeans have had a great run higher recently, running up $2.50 in just a few short weeks as a drought has occurred to end the season, and prices have drifted higher again in overnight trade back to the all-time highs for the Nov. 13 contract. That means that at the height of the 2012 drought, prices were at about these levels.  

The question then becomes, has a $2.50 rise in soybean prices over just three weeks been enough to dial in the late-season stress on soybean crops?  

Can we rally through harvest, or will prices retreat somewhat on the soybean harvest, which is now eminent and will commence in the next few weeks? One thing is certain - we do not have a crop failure on the scale of 2012 on any crop! Yield models still suggest a crop of 164 bu/acre corn (slightly above trend) and a 44.5 bu/acre soybean crop (also slightly above trend) as of last week. (We get updated yield models Tuesday afternoon, which will likely include another soybean decline.) HRS wheat yields are every bit as good as last year, so USDA will need to hike that yield number about 10% by the final report. So crops are not all bad - although they have gone backward in soybeans the past week and likely will decline again this week.  

The weather has been dry, with the Corn Belt proper getting little rain in August, and that has stressed crops once again. We started July with adequate moisture almost everywhere but the HRW wheat belt, and then July promptly dropped excessive moisture on the HRW wheat and Delta region, thus replenishing moisture levels there as well. But recently it has been dry in the Corn Belt, and that has sapped the soil moisture from the ground and depleted much of that excessive soil moisture.

The question is whether there was enough soil moisture to produce a crop, as mining the soil for virtually all of the needed moisture to fill soybeans might be asking a lot of the crop. Corn, however, probably had enough moisture to fill most of the crop, as the corn crop is made in July, and we had cool conditions through most of July that allowed pollination under ideal conditions, and soil moisture should have carried the corn crop through. So we very well might have a record yield of corn, but it's the soybeans where the crops may not be up to par.  

So we might have a bumper corn crop, and a soybean crop that is below average, in 2013. But it is not a disaster crop like 2012. In fact, HRS yields have been every bit as good as 2012 when yields were officially recorded at 45 bu/acre, while this year USDA is still way down at 41 bu/acre. Instead, it's likely USDA will need to hike the HRS wheat yield at least 10% yet to get to where it really was this year. So you can see that the 2012 corn and wheat crops are decent. Will that offset the soybean losses somewhat? We note that a battle seems to be ensuing between the drought-ravaged soybeans (which are trying to continue to go higher) and corn/wheat, which have a more bearish outlook in 2013.  

This becomes an issue especially at harvest, with prices of most crops typically retreating as the harvest commences. Can soybeans continue to rally during harvest? And how much more can soybeans continue to rise in spite of an above-average corn and wheat crop? These are major questions that need to still be answered. Already, soybean prices are at historically high levels relative to corn (2.87 soybean/corn ratio).  Can they go even higher? And isn't there already enough incentive for SAM to plant all soybeans in 2013? The U.S. just might have a mammoth corn crop and be able to supply most of the corn needs for 2013 for the world!

Pro Ag remains bearish, Final Pro Ag downside price targets are still $4 Dec corn, $9.50 to $10 Nov. soybeans and $6 CBOT wheat, but it may take longer for soybeans to reach these levels (and they may need to be raised for soybeans if the crop continues to deteriorate into harvest as appears to be the case with current forecasts).  


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