The short trading week saw soybean prices push higher again thanks to ongoing weather woes in Argentina.
May 2018 soybeans finished the week at $10.475 on the Chicago futures board, up 15 cents, or 1.5%. New crop November 2018 soybeans were up 0.6%, or 6 cents, to close at 10.28 USD / bushel.
Price hit a seven-month high on the futures board. While the USDA has released two straight relatively bearish WASDE reports, we’ve seen a lot of technical trading and speculation pushing soybean prices higher.
Drought across Argentina had reduced production expectations from a string of analysts. Local analysts have been cutting their production forecasts well below the numbers from the USDA. As we’ve noted in the past, the USDA is notoriously conservative in its approach to lowering production numbers abroad.
That said, the Rosario Grain Exchange in Argentina made an aggressive cut to its soybean forecast for the year. The exchange slashed its report from 52 MMT to 46.5 MMT.
Comparatively, Agripac put its number at 47 million tonnes while Argentine consultancy Agritrend is expecting somewhere between 47 and 48 million tonnes. Joining the forecast declines this week, Buenos Aires Grain Exchange lowered their soybean harvest estimate for Argentina by 3 million to 47 million tonnes.
Comparably, the USDA seems steadfast at 54 million tonnes, as per the last WASDE report a few weeks ago (although the market largely expects this number to fall in the March WASDE, which is published on Thursday, March 8th).
While Argentina’s crop quality continues to decline, analysts are kicking around the idea that Brazil’s soybean crop will set a new record this year. Consultancy Safras & Mercado said Tuesday that Brazil’s 2017/18 soybean crop will hit 115.6 million tonnes. AgroConsult says Brazil will produce 117.5 million tonnes of soybeans, up 3.4 million from their previous forecast.
The problem the market is dealing with is whether or not these forecasts will be fulfilled considering weather conditions in the country. Current rains are slowing down the harvest (and affecting grain quality). IMEA estimated the soybean harvest in Mato Grosso is at 58%, compared to 66% a year ago. The soybean harvest in Parana, which accounts for 20% of Brazil’s soybean crop, is only sitting at about 9% complete. Last year at this time, 31% of the record crop was harvested.
A larger Brazilian crop is certainly bearish for prices. It’s not just a matter of more soybeans being available on the global market. It comes down to what one major buyer – and only one major buyer – plans to react to a suddenly larger crop in South America. China is paying close attention to these figures.
As you already know, China is exploring restrictions on U.S. soybeans as a means of retaliation over U.S. tariffs on washing machines and solar panels. Should China decide to restrict U.S. soybeans, that news will likely fall when Brazil is deeper in the harvest and a larger crop is available.
Ultimately, we continue to see more upside to this market just based on how much rain (or lack thereof) is in the forecast for Argentina. Based on how the market reacts bullishly on Monday after poor weekend rains, we think these targets aren’t offsides.
We continue to eye the following targets (with the price the contract closed at on Friday in brackets):
• May 2018: $10.75 ($10.475)
• July 2018: $10.90 ($10.56)
• November 2018: $10.65 ($10.28)
• January 2019: $10.75 ($10.325)
We remain 80% sold in old crop and 20% sold in new crop.
One thing I’d like to mention though is that we’ve added a new “noise” factor. To be clear, it’s just a listing of all of the sales recommendations and weekly email digests that we’re sending out.
We got some feedback from subscribers asking for a simpler way to provide easy access to all sales recommendations and weekly digest emails. So, we’ll just be duplicating the email into an article in this specific factor. You should consider bookmarking the link as this is your source of all timestamped soybean sales recommendations! Further, we’re looking for feedback on how to make this product better for you (AKA give us feedback!).
Have a great week!
– Brennan and Garrett
February 21 – A Secondary Assessment of Argentine Soybean Potential
February 21 – How Many Soybeans Will Argentina Likely Grow?
February 21 – The Nightmare Scenario for U.S. Soybean Farmers
February 18 – Soybeans Weekly GrainCents Digest
February 16 – What Sales Choice Will You Make Moving Forward?
February 15 – What Impact Would Less US Soybeans Have on Chinese Consumers?
February 12 – Planting Oilseed on Oilseed? Easy There Tiger
February 12 – GrainCents Soybean Sales Position Update
February 12 – How Are Chinese Soybean Buyers Dealing With Import Requirements?
February 8 – Recap of the February WASDE Report
February 7 – February WASDE Action Plan for Soybean Prices
February 6 – COFCO is the Real the King of Soybeans
February 6 – Canadian Soybean Stocks Still Bulging in 2017