Soybean prices are leading the grain market again this morning, with winter wheat prices not far behind, thanks to ongoing drought concerns.
“I am fearful, or suspicious, of generalizations… They cannot guide me reliably in making decisions.” – Ruth Bader Ginsburg (Associate Justice of the Supreme Court of the United States)
Grain markets this morning are mostly in the green, driven by soybean prices, soymeal, and wheat prices thanks to ongoing dryness concerns in major growing regions.
Soybean prices and corn prices didn’t gain as much yesterday, as some farmer selling supported a quieter trading tone. This morning though, eyes are back on South America and the weather forecast over the next few weeks.
As Garrett noted in yesterday afternoon’s Grain Market Today, Kansas City wheat prices were the bee’s knees yesterday, climbing more than 2% on ongoing dryness concerns. Also adding fodder to the bullish fire is the colder weather in Europe. These headlines can only get so much play, however. The market can abruptly become extremely cognizant of being overbought, and woosh, there goes the gains. It’s like the market forgets that there is a record amount of wheat or corn or soybeans in the world, and then all at once, it remembers. This translates to recognizing that sales opportunities don’t last forever. As I like to say, “sell on the rumor, profit on the fact.”
A New World for Soybean Prices
Thanks to China tightening their import standards, yesterday, the USDA issued guidelines to farmers and grain exporters to reduce weed seeds. Included in the recommendations are for farmers to seed their soybeans into rows of 15 inches or less and for exporters to clean railcars and boats before loading.
We’ve covered the factor of China’s relentless demand for soybeans in GrainCents, especially how soybean prices may be impacted by the People’s Republic tightening trade up. Specifically, in the past two weeks, we’ve looked at:
It’s certainly not all negative for soybean prices (and canola prices to a certain extent) as there’s certainly some South American weather premium being built into the market. For canola prices, we know that China likely will always need to import canola, and the rise in soybean prices is helping. However, we also pointed out some of the downside risks to our GrainCents canola readers in our Sunday morning canola sales weekly email/digest.
Less Confidence in South American Soybean Yields
As the Brazilian soybean harvest putters along with the intermittent rains – especially in central states – yields aren’t looking like they’ll surpass last year’s record numbers. Thus, there’s a growing group of analysts who think that last year’s record crop of 114.7 million tonnes may not be beaten.
In the southern state of Rio Grande du Sul, rains are needed. The region often gets the same weather that northern regions of Argentina do, hence the moisture issues. As we’ve said a few times this week, there are some small rains in the forecast for Argentina, but nothing of significance until next week and mid-March. One meteorologist says that “there’s not a lot of room for improvement at this point,” as it relates to Argentina’s yield potential. 
Ironically, next week we’ll also get the updated WASDE report from the USDA. This means that over the next few days, Bloomberg and Reuters surveys will start pouring in as to what the average analysts’ guesstimate for Argentine and Brazil production is. The USDA will likely only incorporate weather and crop conditions through mid-February, or the third week of February at best.
Thus, the question should be asked, “how will the market interpret an Argentine soybean or corn production number from the USDA that isn’t as bullish as other private estimates?” Going into said WASDE, this will be the main question that we’ll try and answer for our GrainCents subscribers.