The soybean market bull is sprinting, analyst says

Markets can move on from multiyear lows, analyst says.

Grains continue their uptrend, with new two- to three-year highs in soybeans again yesterday, penetrating the $10 area for the first time in over two years.  

There is much to be excited about in soybeans, as USDA botched yield estimates again this year, hiking it to 53.3 bu in August only to have to start to backoff in Friday's September 11 report to 51.9 bu.  

It still is ridiculously high, as the Pro Ag yield model yesterday dropped to 49.9 bu (down 0.11 bu last week), which is a full 2 bu (165 MB) below the current estimates.  USDA cut carryout in Sept. from 610 to 460, down 150 mb or 25% already in one report – so the government must have decided that was enough – or prices might go up! Therefore, prices keep going up.  

The simple truth now is that USDA is still 2 bu/acre too high in soybean yield (and yield is dropping every week), which is 165 mb more that the USDA needs to cut from the 460 mb number, which takes us to 295 mb (below 300 mb). That equates to 33% lower in ending stocks and the tightest in years!  

Also, USDA is too low in exports as the U.S. is selling soybeans like crazy to China (maybe another 50 mb cut?).  So it's becoming much more interesting in soybeans with an election coming. The best thing that China can do is buy lots of U.S. soybeans (and corn and wheat), which will allow them to sell us $500 billion in goods (while buying maybe one tenth that in ag goods). 

READ MORE: Follow the smart money flow in the ag markets

Crop progress yesterday showed corn harvest at 5% (equal to normal), 89% dented (7% ahead), and 41% mature (9% ahead).  Corn conditions dropped 1% to 60% G/E, dropping the Pro Ag corn yield model 0.8 bu to 176.7 bu, still below USDA at 178.5, and just slightly above 'trend' 175.4 bu.  

So, USDA needs to cut another 2 bu/acre, or about 165 mb; that would further lower carryout.  It's likely that heat will cut that yield in Southern states even more by harvest completion, as typically hot years like 2020 are not good yielding years in the southern Corn Belt.  

Since Aug. 10, our yield model is down almost 5 bu/acre, and it could continue to drop into October as lie detectors (aka combines) are released into more fields.  

Soybean conditions were down 2% to 63% G/E, dropping yield to 49.9 bu as 37% are dropping leaves (6% ahead of normal).  

HRS wheat is 92% harvested (equal to normal), while barley is 95% harvested (1% ahead of normal).  

Winter wheat is 10% planted, 2% ahead of normal.  

READ MORE: The wheat market sees more correction, analyst says

Weather forecasts are calling for virtually no rain in the United States the next week (except for Hurricane Sally rain in Alabama), and then next week very little precip as well (below normal), with only Louisiana, Arkansas, Missouri, Illinois, and Wisconsin getting any significant rain at all.  

We are hitting price levels that, once again, one could make sales at – finally!  Patience was a virtue, as we have two to three crop years of soybeans to market (including the 2020 crop) since we made no sales of soybeans during this time when prices were so pathetic.  

Note that any sale the past two to three years was a bad one compared with today's higher prices – and fortunately we didn't make any of those in soybeans.  In fact, the only significant sales we made were last year in corn, where we sold about 120% of a crop in the May/June19 rally to $4.60, with most sales at $4.25 and higher.  

Now the difficult decision to be made is, "How long do you hold, and for what price?"  

It's clear that soybeans are the best sale opportunity right now, with winter wheat a close second but prices have a way to go to call them "good" prices.  They just seem good now because we just came through perhaps the worst two-year period in decades.  With multiyear technical bottoms in place on all major grains, it will be a lot more fun marketing the next two years.  

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Ray can be reached at raygrabanski@progressiveag.com.  
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Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country.  See http://www.progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com. 

This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. 

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