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Time to sell soybeans?

Soybeans have also gained on corn, making soybeans a more attractive sale as we've now rallied back above the 1.90 soybean/corn price ratio. So, soybeans once again are a more attractive sale choice.

This was a good price (as was $7.60 March corn) to advance sales or make catch-up sales to our recommended level of 100% priced 2012 crops.

Last week, we talked about how soybeans have rallied to the top of the recent price range at $14.90, reaching the Pro Ag objective for this recent recovery and a place to get more aggressive in making soybean sales for speculators and hedgers.

For soybeans, we removed hedges at the $14.11 November area when they bounced down to that level (and actually another 20 to 30 cents lower). But soybeans quickly bounced $1 or more higher to the $14.90 level January, a place where soybeans could once again be sold. We had recommended selling corn at $7.60 March futures instead of soybeans as corn was historically high relative to soybeans at a soybean/corn ratio of less than 1.90. Since then, however, corn has lost relative to soybeans, so that the ratio is a little more favorable for selling soybeans.

So, producers can once again start selling soybeans. For Pro Ag hedgers, we'd recommend rehedging 100% of the 2012 crop again at this level.

South American (SAM) weather has improved somewhat from the recent wet period in central Argentina, with the next 14 days forecast to be warmer and drier in the wet central Argentine regions. This should allow planting to commence and get to nearly complete, as we pretty much end the planting season in the next few weeks. This would be just in time to rescue planted acres, allowing it to at least get planted, albeit later than normal. Brazil is having better luck planting, with USDA making no changes in the projections for their production in the December report (they did reduce Argentine corn production 0.5 mmt in the December report - the only change in SAM production estimates).  

Soybean charts showed a rally back to the $15 area. That could encounter some resistance, which it has by seeing a bit of a sell-off after hitting those levels. 

Of course, SAM weather will become an even more critical factor as we approach January (their July equivalent U.S. month). Corn is typically made in January in SAM, while soybeans in February weather. Therefore, the weather will become even more critical over the next eight weeks in SAM.

So far, there has developed some dryness in northeastern Brazil, and it's still a bit wet in central Argentina. Any variation from that theme could provide some relief (as is forecast for the coming two weeks) and some price pressure to grains.

Corn prices have remained in a range between $7.70 March corn and $7 to $7.10. Pro Ag has recommended sales at the upper end of this range, as these levels are still very good sales levels for corn. Even though the U.S. has paltry supplies with a 25% below trend yield in 2012, we still have virtually no export demand for corn. We wonder if internal feed demand is also slower than projected, as the high price pushes feeders toward alternatives. Of course, if corn is the only game in town, that doesn't leave many alternatives for some producers.

We noted that USDA hiked world wheat stocks considerably in this December report, which perhaps suggests why U.S. exports of corn and wheat are so paltry.

Perhaps the world has larger supplies of corn and wheat than we currently are anticipating? Certainly, the slow pace of exports to date indicates an unwillingness to pay current prices for these commodities.

Contrast that with soybeans, which continue to show large export books for both shipping and sales. There is export demand for soybeans, but for corn and wheat, they are anemic at best (corn and wheat combined typically less than soybeans, or even only half as much as soybeans some weeks). There is some reason why U.S. exports are so slow for wheat and corn, and perhaps we'll find out those reasons in the coming few months of reports, with possible revisions upward in production estimates around the world.  

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