Time to Move All Old-Crop Soybeans, Start Selling New Crop, Analyst Says
Beans end the week on a rather boring note as the Chinese were absent due to their New Year’s holiday, and fresh news to trade was lacking. For the week, the front month March contract lost 18¼ cents. The market was under pressure most of the session on ideas that South American weather is improving and concern over potential upheaval with trade between the U.S. and Mexico. Mexico is the U.S.’s third-largest agricultural importer buying $17.7 billion worth of goods in 2015.
Bean traders are keeping an eye on how Trump and Mexico are getting along and waiting to see if he takes the same hardball approach with the Chinese who are the biggest importer of U.S. beans. Allendale released our projections for the 2017 year this week. We anticipate the U.S. producer will plant 6.221 million additional acres in 2017 for a total of 89.659 million acres. Allendale is using a normal linear-based trend yield estimate of 47.1 bushels per acre. (Last year’s record was 52.1.) With planted acreage of 89.654 million, harvested at 88.775, and a 47.08-bushel-per-acre yield, we project production at 4.179 billion bushels. That would be under the 4.307-billion-bushel record from last year. Beginning stocks will have an extra 227 million compared with the previous year.
With a slightly larger import than 2016/17, we see total soybean supply for 2017/18 at 4.633 billion, 104 million more than last year. We are using a demand number that is 82 million larger than last year (78% offset of the supply increase). We are projecting ending stocks at 443 million, just over the 420 million from last year. Stocks to use will be slightly larger at 10.6% vs. 10.2%.
Drew Lerner told us very clearly that this year’s weather was not lined up for big rains for all areas at key times this summer like last year. We are set for normal weather and mostly normal yields. Using trend yields, our models suggest the current soybean rally has completed its job. July soybean futures are seen falling to $8.67 for the presummer low. We project that November futures are at the highest level they will see through June. Downside is pegged at $8.84 before the summer rally. Allendale is clearly a bear for midterm pricing.
We strongly advise moving all old-crop soybeans and getting new-crop sales on the books, now.
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