The soy was sharply higher driven by the talk that china has again engaged the US regarding trade wars. It is my contention, and has been mine that the Chinese will have no choice but to give. It may now be upon us. They are suffering although the media here does not report the reality. They cannot afford this. Period. We already know what has happened with the tariffs. What will transpire if they are removed now is the question. There will certainly be a resumption of US purchases. This will force a rally back. I would like to say that It is my personal belief that the purchases of beans may resume. I do not believe there will be a massive shift in beans. More may well be taken but not enough to wipe out the massive carries we are building. I do believe China has reached a saturation point. It is important to note that nov 2017 traded up to 1030-1040 range. The carry this year both domestically and globally is much larger. Look at 2019 beans 942 settle today. A rally to 960-980 presents value in my opinion for hedgers. A increase of 2 bu to the acre leaves a carry above 700. A 3 bu to the acre increase leaves a carry above 800. It will take a serious increase in exports to china to alter that course. These are opportunities to make long term sales at the right price.
The feed grains followed higher although not as enthusiastically as the beans. The corn continues to grind higher. It is my belief that the corn has a more friendly story than the beans. The weather has been good overall. It appears we will hit a stretch of dry warm weather. This may prove to push the corn to a maturity. This offers room for debate as to what will actually happen regarding the final yield. It is important to note that many private models predict a 2-4 bu increase in the next report. If this is the case then the carry should hardly budge over time due to the excellent demand. In addition, there is now talk that China may need corn. If that is the case corn may well be the winner in a truce. The administration is also engaged with Mexico it appears and would like to finalize a deal there. There is much to follow. There will certainly be volatility in august. The risk profile is going up. Talk heed and quantify your risk.
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” IMAGINATION HAS A GREAT DEAL TO DO WITH WINNING ” MIKE KRZYZEWSKI
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