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Soybeans take center stage

04/06/2012 @ 7:02am

In the past several years, market talk has centered on corn.  The huge growth in ethanol demand, the ever-increasing number of acres devoted to corn and the past two years of disappointing yields have traders (and farmers) constantly sitting on the edge of their seats. 

It is time to switch the focus to soybeans.    

The fascination with soybeans really began months ago with the ever-shrinking soy crops in South America.  Today’s estimates of South American soy crops are down over 20 percent from what analysts were expecting as planting began. 

The small crops have pushed demand back to the U.S.  Basis levels in Brazil continue to be very strong, making U.S. beans competitive at a time when one would expect Brazilian dominance.  Therefore, U.S. exports could finish the crop year on a strong note.  Crush may also increase as protein is still in demand around the world.  Add 20-40 million bushels to each category and old crop supplies are whittled away.    

The USDA’s very small bean acreage number simply added fuel to this fire.  The soybean market now has a job to do—find more acres.  This involves higher prices and better net returns than cotton, corn, etc.  Farmers will also need to see returns to planting additional double-crop acres.  And, if the acres are not found, the soybean market will have to ration demand until the next South American crop is available in March of 2013. 

Working against bean acres has been the warm weather which gave farmers the chance to make progress on fieldwork, fertilizer application and planting in some states.  Nice spring weather always seems to mean an increase in corn acres. 

It will take until the next USDA plantings report on June 29th before the market sees if soybeans have won the battle. 

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The risk of loss in trading commodities can be substantial.  You should therefore carefully consider whether such trading is suitable for you in light of your financial situation. 

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