- A $26 range on front month soybean meal (so far) today highlights the volatility being experienced for the reasons we highlighted this morning. For completeness, we should add that we are now at the bottom of the trading range, just into negative territory. Cash basis prices have held firm for much of the day as end users have double booked to endure deliveries as they allowed stock levels to drop in anticipation of abundant new crop supplies which have been slow to materialise both from a crush perspective as well as the logistical nightmares. It is expected that October crush data will reveal an increase in pace of almost 50% with around 157 million bu of soybeans being processes.
- Currently it has been revealed that US nutritionists are exploring ways of reducing soybean meal inclusion levels on account of the current expensive price levels. $430-$440/ton is hard to absorb and DDG’s, cottonseed and canola (rapeseed) are all being explored as is relatively cheap lysine. Such actions will, if exercised, reduce soybean meal demand and help prices to decline to more realistic levels. At such a time as we see prices drop, we would expect the move to be both dramatic and speedy.
- In Brazil it is reported that Mato Grosso has planted around 20% of its soybeans as of last week, this is below the five year average of 42% although this has not (yet) translated into yield concerns. However, there is concern over the safrinha corn crop, and there is even talk of a second soybean crop in Mato Grosso. The current market pricing structure can only further encourage this and we would venture to suggest this is a “wrong” signal to give in light of large and growing global stocks.
- Yesterday’s US crop condition report showed corn to be 74% good/excellent, unchanged week on week, and to be 46% harvested, which is a touch better than expected and compares with the ten year average of 62%. Soybeans were reported to be 70% harvested as expected, which is behind the ten year average of 79%.
- It is probably correct to say that chart technicals look bullish in a fundamentally bearish market right now. The bulls and the bears still have to establish a supremacy and market direction. As we have said on many previous occasions, when the technicals and fundamentals do not agree we tend to side with the fundamentals, and we see no reason to veer away from this stance right now.