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Soybeans sandwiched between market forces

The winter of 2013-2014 has begun, and it seems the soybean market is caught between a rock and a hard place.  Let’s define the rock as small supplies in the U.S.  Let’s then define the hard place as increasing supplies in South America. 

This seems like déjà vu for the bean market. It is the same push/pull idea that the market dealt with last winter.  Soybean prices chopped around in a range during the winter and spring. No clear price direction developed.  

To review, on the demand side, the U.S. has been able to export and crush almost every bean the U.S. farmer can grow. Export demand, primarily from China, has been huge. Carryouts end up very small every year. 

On the supply side, the market sees ever-increasing crop sizes from South America. Although it is not yield-determining season yet (think January and February), the larger acreage and decent weather have market participants feeling that the Brazilian and Argentine crops will be larger. 

So where is the tipping point? When are the larger supplies in the southern hemisphere too much for the market to handle? Does the soybean market ever break sharply under the weight of these supplies? 

The other factor to keep in mind is U.S. soybean acreage for 2014. Many expect bean acreage to be substantially higher in 2014. Right now, acreage forecasts are being made based primarily on economics. As the winter progresses, more analytical firms will do surveys of planting intentions. How big will the acreage shift be?

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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