The beans were up led by meal. The talk du jour was the Chinese prices are higher over concern about a lack of supply. A couple perceptions that I am working through. The Chinese bean imports in July are less than anticipated. Fact, they are trailing last year this time by 2mmt. Demand gone is gone forever. It goes to the balance sheet. At least that was the teaching of old. Maybe there is something new under the sun. The Chinese will most likely be forced to cull animal numbers. This is not only due to the trade spat. They have overproduced and can’t consume more. I call this stagnation, or contraction. The Chinese are taking offers on alternative protein sources. Yes there are many. Copra meal making a comeback. The Black Sea sunflower. The DDG’s of the world. All viable sources, and there are more. Not to be a bore. Point, the world is awash in oilseeds. Oilseeds equals meal, in most cases. There is much talk of the huge global bean exports. Sure, when the US price is, pick a number cheaper than the South American. The world will buy the US beans, crush them and make 1.50-2.00 per bu selling the products ( meal and oil) . This is not necessarily so much demand as it is buying to capture a margin while it exists. This is elementary my dear Watson. I am elated that the beans have rallied back. Please be aware that nov 19 is close to 950. Hedgers take heed. This represents value. The current domestic bean stocks are still very high. This will not change. In spite of a record crush pace. The real winner in all this is the commercial crusher. The bean price to them is essentially irrelevant given the margins. In my mind this is not a supportable reality. It is my belief that the Friday report will confirm a higher yield. The weather is turning a bit moderate and less friendly offering some more moisture to finish things off. Will we put a high in before the report? It is my belief we will. Perhaps today was that or maybe tomorrow. As I have said many times, I do not have a crystal ball, and sometimes lack clarity. However, some of this does not make sense to me given my perception of the numbers.
The feed grains sure were lackluster today. I know the report Friday is key in peoples minds. The global scenario has a real window of opportunity for the US exports. An executive at Dreyfus announced today he believes the Brazilian corn export estimate will need to decline by as much as 7 mmt or they risk running out of corn themselves. In addition, the issues in the EU, the issues in the Black Sea with feed grains. Talk Russia may need to put an export tax on feed grains. It goes on and on this year. The Friday report needs a big increase in my opinion to prevent a further draw down in US stocks. The numbers are friendly both domestic and globally. The window is not infinite, but it is there for a bit. As they say, the best laid plans of mice and men. Apologies for the literary references today. They just seem appropriate. I remain friendly corn. I believe the price could be higher over the next 3-6 months. As always, have a quantifiable risk in place. Let’s see what the next two days hold in store.
Much thanks for the global conversations. I invite any thoughts for or against ideas. We are all climbing the same difficult hill. To discuss 800 993 5449 or jwalsh@walshtrading.com
” THE GREATER OUR KNOWLEDGE INCREASES THE MORE OUR IGNORANCE UNFOLDS ” JOHN F KENNEDY
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