The Report today on stocks held no major surprises. However it did confirm more of everything. The beans showed a 2017 increase in production of 19 million bu. This will typically hit the carry over. This pushes the carry to approx 900 mil bu. This is so far away from normal it defies reality. The next production report could push us to or close to 1 billion bu. A number like corn historical carry overs. The issue I have here is even with a resumption of a normal Chinese trade, we can eat into the carry. With numbers like this the bean price from a historic perspective is way too high still. The South American is attempting to plant at a record pace. This will expand acres and open an earlier window for exports. There was a new case of African flu found in China today. This seems to hold little interest yet as meal prices are rallying there on perceived tightness. Bean stocks in China are more than ample. The US will sell anyone cheap beans (relative to South America) to either crush or ship into China. There are no shortages in my opinion. This is an interesting time to say the least. My biggest question is when do high margin, huge crush capacity, and huge carry overs flood the market in protein?
The Corn came under pressure. The report showed approx 100 million bu more than anticipated. I have built a friendly window for corn to appreciate. The demand should be there for the near future. However the Govt numbers continue to add to the supply. Perhaps the best corn will do is remain steady. It is also my belief that when the demand window closes the US goes back to being another supplier to the world. Good domestic demand, good export demand. However, the global carry could appreciate with the next global crop and this could ease any tightness. The USDA report in oct will be important for yield and demand. I think we will move sideways into that report. It needs a friendly kick to get the markets moving higher.
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” WE CAN NOT SOLVE OUR PROBLEMS WITH THE SAME THINKING THAT CREATED THEM ” ALBERT EINSTEIN