|
| The soybean mkt is now at price levels seen only the second time in history. The all time high is $12.90. Export demand numbers in recent weeks have “accelerated” despite higher price levels. Demand for US soybeans “cannot stay this strong”.
While South American weather remains more good than bad. Most private acreage projections for Brazil’s 2008 soybean crop cluster around only a 5% increase.
This points to the importance of larger SA crops. We only need to sell about 9.2 million bushels (250,000 tonnes) of US soybeans per week for the rest of this season to reach USDA’s current year-end projection of 975 million bushels.
A reputable private forecasting group revised their Brazilian crop forecast downward. They project Brazil's 2007/08 soybean crop, now being planted, at a record 62.4 million tonnes, slightly down from October's forecast of 62.8 million tonnes.
Earlier this month that ratio between Nov 08 beans & Dec 08 Corn was as low as 2.25, not far from where the 2007 ratio was during spring plantings. That was when producers decided to increase corn area 15 million acres and drop soybeans 12 million.
It is imperative that the soybean mkt forces producers to switch back at least 8-10 million acres. If successful, corn stocks will get explosively tight in 2008/09.
The Census Crush was slightly above expectations at 163.5 mb. Soyoil stocks came in under expectations & meal stocks were tight on higher production!
Corn demand numbers are strong, but, supplies are adequate. I am not a corn bear. In the case of corn, both shipments and sales have been strong. The EU is struggling to agree on expansion of more GMO varieties; the EU Ag Commissioner recently quoted, "To postpone any new approvals will have dramatic consequences. The production of meat will move out of Europe and then we will have to import meat (from animals that are) fed with GMO products. So we will be eating it anyway".
Rumors suggest China's government will sell more than 2 million tonnes of corn to domestic users from state reserves to reduce record domestic prices. Some other countries are in the same fix. Domestic demand is up as industrial use of corn is growing, including ethanol grind.
Old crop wheat values are reflecting the tightness in overall stocks. Demand for US wheat has slowed over the past month; but cumulative total shipments for the year are still up sharply (69%) vs. a year ago.
Quote from International Oil Analyst:
… expect China to continue its soybean purchasing campaign with the U.S. getting a major share. Seasonally low South American soybean exports in December 2007/February 2008 is one main reason.
… forecast China's August 2007/July 2008 soybean imports will rise to 34.0 million tonnes from 28.72 million tonnes in 2006/07 because of the country's poor crop and high domestic demand.
"Higher domestic demand for soyoil and meal and insufficient crushings of other oilseeds are likely to result in an increase in Chinese soybean crushings by at least two million tonnes," it said.
Some weather excerpts:
Weather conditions have not been ideal in Argentina recently. Rising stress potentials are possible in the driest areas. Net drying in Argentina is expected to accelerate into Saturday as warm to hot temperatures and limited rainfall impact the nation. Soil conditions are quickly becoming too dry in Cordoba, Santiago del Estero and parts of southern Santa Fe.
The bottom line is that most of Brazil will experience good summer crop conditions over the next two to three weeks.
Speaking only in terms of speculation, none of this is new news. My mind set remains unchanged from two months ago, except I am viewing new crop. I still like buying the dips in Nov08 and Nov 09 soybeans; look cheap relative to corn values. Wheat and corn will be laggards.
BUT ANTICIPATE BREATHTAKING SHARP REACTIONS!! We are entering the Holiday period and the Funds are heavy longs! Always a time period tempting to cash in profits by year end. Prices always MOVE TO THE ORDERS.
| |
|
My Perspective
