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Soybean rally raises new questions

The soybean market has a fascination with South American weather and this will intensify as the growing season progresses.  While there is an area of southern Brazil that may be too dry and an area of Argentina that is definitely too wet, there is still plenty of time to plant, so market moves are muted.  In January and February, it will be a different story.

Besides these weather concerns, the rally in recent weeks is a function of correcting the oversold nature of the soybean market and a response to strong export sales.  Depending on the day, there have been great sales for beans, meal and oil.  The soy oil numbers are particularly eye-catching.  Buyers are mostly “unknown” but presumably they are China and India. 

For every positive tidbit, there seems to be a negative one.  So, while there are strong export sales, the market also realizes the November crop report possibly provided enough beans to last the crop year.  This diminishes the fundamental need for a sharp rally to restrict use.  And while there are weather concerns in areas of South America, a lot of the acreage is in great shape and pod-filling is still a long ways off.

For the corn market, the bullish/bearish information has caused large swings in price.  For example, a slow export pace is bearish.  Last week’s large sales were considered bullish.  (FYI, the pendulum swung back to bearish this week.)  Ethanol production is really close to the USDA’s number, but the fact that ethanol plants have poor margins is probably bearish.  Feed use could go either way, but there is no concrete data until the January reports.    


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