COMMENTARY: The complex was sharply lower last night. By the morning the bean oil was higher and the rest had pared down the losses. The close tonight paints a different picture. The oil share leading the way. This was not a explosive day but a steady move higher. I have a few thoughts going forward regarding beans. It is my thought that the outcome can be very different depending on the month of August. If we assume the govt numbers (usda) are approx accurate related to the acreage and the exports. The last estimate gave us a 155 mil bu carry over. This would in my opinion leave the new crop price in the 12.50 – 13.50 per bu price level. This could represent the very high end of the range given the fact that the global acreage and carry should go up into the next year. If we look at the month of Aug and the weather moderates, with timely rains in the majority of the key growing areas. Especially the areas that have thus far been dry. It is conceivable to add a reasonable amount to the yield. This is especially true as the govt did not increase trend line much at all. A range if 1.5 – 3.5 would be plausible. Lets settle on 2 bu to the acreage increase under the right circumstance. Then the crop increases 174 mil bu. This with the 155 carry would leave a moderate 329 mil bu carry. This while not real bearish would take the edge off the market. Especially with the global growth and the slowing of Chinese demand. It is my thought that if reality the price could then slip back to 10.40 – 11.00. These are still respectable prices, but much different that we witness today. The weather this week still seems troubling to close July. Lets watch closely the forecast as we enter August.
BE WELL,
John J. Walsh
President, Walsh Trading, Inc.
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