Commentary:
Report Highlights: There was a sharp cut in carry-in here for 2020/21 as well per the USDA quarterly stocks, with acreage down 700k and yield unchanged; that leaves 2020 soybean output down 55 million bushels (mbu) month over month. Exports bumped up 75 mbu as well thanks to an historic sales pace to this point. Overall carryout or ending stocks down by 170 mbu from the September WASDE report to a tight 290 mbu right on the low end of the trade estimate range.
U.S. carryover Corn: 1.995 billion bu. for 2019-20; down from 2.253 billion bu. in September
— 2.167 billion bu. for 2020-21; down from 2.503 billion bu. in September
Beans: 523 million bu. for 2019-20; down from 575 million bu. in September
— 290 million bu. for 2020-21; down from 460 million bu. in September
Wheat: 883 million bu. for 2020-21; down from 925 million bu. in September
In summation, this report in my view it leaves very little margin for error now regarding potential weather problems in South America. If planting is delayed in Brazil it would extend the U.S. export season. The tight U.S. soybean stocks estimate tells me that funds and speculators are going to be hyper-sensitive over a potential weather market in South America. If Brazilian exports are not ready until March, or delayed for any significant period, the potential for a tighter U.S. soybean balance sheet due to increased exports to keep China supplied are real and you may hear talk of rationing. Add production losses in Argentina and/or Brazil, and it could get crazy. Beans in the teens? Don’t rule it out as unimaginable as it sounds now. The funds in my view love trading soybeans from the long side. They haven’t had many chances to do that in recent years given burdensome ending stocks and a trade war with China. They may be sharpening the knives to drive price higher and buy any dips until South American Production is a known. That most likely wont be revealed until Mid-January at the earliest. Despite Brazil intending to plant a record amount of beans for the 20/21 crop year, the old adage that “its not what you plant, but what you grow” has heightened relevance. If you combine a weak Dollar, a US Presidential election and aftermath that is so uncertain, and of course if the weather remains adverse due to La Nina, look out and buckle up.
Trade Ideas-N/A
Risk/Reward-N/A
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