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Markets move differently

Ray Grabanski 04/26/2012 @ 6:51am President, Progressive Ag www.progressiveag.com

This week, soybean prices have broken out above recent resistance, moving to the highest prices since 2008, and above the summer of 2011 highs near $14.50.  

Running close to $15 before selling off again, it might not take long for soybeans to push nearby futures to the 2008 highs near $16.50.

The impetus for the soybean push was the disastrous crop in South America (SAM), with both Argentina and Brazil reporting disappointing yields in both locations.  As harvest wore on, it became more and more apparent that the crop just wasn't there, and we have perhaps the biggest 

disappointment in decades in SAM.  That pushed nearby prices higher as the demand from China is relentless, pushing soybean prices to unheard of price levels.  We haven't spent much time at the current price levels in the history of world soybean prices!

This is a great dichotomy for the market to deal with, as a very poor SAM crop is also being dealt with, while the US is enjoying perhaps its best spring planting season ever.  Most crops are at or well ahead of normal planting progress, and typically that means large yields of corn and HRS wheat crops, as they avoid the heat of the summer for reproductive stages.  

Virtually all crops are well ahead of normal planting progress, and with an open window of planting this week ahead of forecast rains over the weekend, we might have indeed a very good emergence and early development of most crops.  Corn planting was already at 28% complete on April 22, and with a good week this week it's likely over 50% will be planted by April 29th - which will probably lead USDA to hike yields above the 164 bu 'trend' yields in the May report.  Soybean planting is even underway already, with 6% of that planted compared to only 2% normally done.  HRS wheat is the most advanced, with 57% already in the ground vs. only 19% 


Not only is planting rapid in perfect planting conditions, but winter wheat is also rated very high for this time of year, implying a record shattering yield is likely this year.  Pro Ag's yield model is already at 48.84 bu/acre, 2 bu above trend and at record shattering yield potential.  

Conditions are rated 63% G/E, well ahead of last year's disastrous crop. That means more grazing and less feed use needed of corn for cattle, as well as more bushels of wheat available for feeding this summer.  Perhaps it's no wonder that corn and wheat prices can't seem to rally with the soybean market!

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