The USDA report was important in my opinion. These numbers were well above the average guess domestically and were on the high side of the global stocks as well. this is significant for various reasons. partly because the USDA continues to estimate a larger global trade. In essence we are growing carryovers to global highs with exceptional demand. If demand stagnates, which I believe will be the case. Or worse contracts, the carryover situation will be very burdensome to price.
Looking at the numbers. The USDA increased the yield to 49.9, This is important and may be a indication of just how good the genetics really are. This bump keeps the carryover at 475. Also the fact that the usda increased demand can be questioned. The southern hemisphere currently has a large stock situation and will be offering stiff competition in the future. The domestic carry has more than doubled in two crop years. The global carry has grown over 20 million tons in two seasons. to just under 100 mln mt. That’s right folks 100 million metric tons. Ther bearish aspect of the market to me also is the fact that the soymeal has had trouble globally with burdensome stocks. This should continue unless the meal experiences a significant break. The shining light of the report is the bean oil. The biodiesel tariff has and will increase demand significantly. the bean oil stocks have dropped 300-400 million lbs. due to this fact and are at approx. 1.7 billion lbs. In the near term I expect the beans and meal to both work lower while the bean oil remains steady. There still exists a opportunity to look at next years prices as a good hedging opportunity. For the trend follower the carryover and production levels continue to grow. this may not help prices
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