The USDA offered few surprises today. There are a few details I think are worth going over as perhaps they are relative in the medium term. The supply and demand did estimate the bean carry for the new crop at 140 million bu, slightly higher than anticipated. Still tight. This assumes a very modest increase in yield. The USDA modeled corn increases over a 20 year period. I am not sure if the same methodology was used. The point is, if the weather is beneficial, then the yield may show increases. The US will lose market share to South America this year for exports. The question is when, due to current concerns. However, the USDA has estimated a larger China import program. I question this overall and think this may be overly optimistic. This theory of course remains to be seen. The global carry for beans is more than ample. Having said all of this, the current climate remains friendly beans and may for some time. It is my belief the veg oil market can continue to be the driver. The May contract expires Friday. The July oil share currently sits at just over 42%. It is my thought that it is possible to see a move to 50% oil share. The global fundamentals for veg oils has not slowed. One thing that could exacerbate this is the Parana river level. Any further issues here and things get real, real, tight. The point here is the bean oil market may still have room to go. This could be fuel for further soy bean advances. The meal in this scenario remains the weaker of the products. A break would not necessarily be imminent at present. However gains could be limited. The Argentinian meal export program is now full steam ahead. This too may be a thorn in the US program. As always the markets are at lofty levels. Exercise caution.
BE WELL,
John J. Walsh
President, Walsh Trading, Inc.
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