- Post report day and there has been little fresh news! Chicago folk lore often refers to Turnaround Tuesday, and this has applied today too with the soybean complex leading the way. Cash soybean meal basis continues to be firm in the east, and this has triggered some technical follow through buying that has supported the market and made new rally highs. It has been reported that consumers in the eastern US are continuing to pay up for rail deliveries, albeit on a somewhat reduced volume than last week.
- From a good news perspective, there is talk that Russian winter wheat conditions have improved lately on account of warmer weather. The US$ has found some stability at Monday’s highs, energies are lower again and equity indexes have made new highs. This must beg the question as to how comfortable are the funds with their longs given the outlook for record global agricultural output.
- It has been noticeable that Ukraine’s FOB corn prices have dropped this week, possibly coincidental that the USDA increased their output by 1 million mt. Maybe, just maybe, we are seeing a return to crop production fundamentals – at last!
- US weather conditions are forecast to be bitterly cold, a negative for the market, in the coming week although this is predicted to change afterwards with seasonal temperatures scheduled to return. The S American weather outlook remains unchanged with the next 8-10 days dry across Paraguay, S Brazil and Argentina, which will allow planting to progress rapidly in generally favourable soil conditions. Normal rains are forecast to return to S Brazil and Argentina in the 10-15 day period whilst daily tropical rains continue in N Brazil. The long term outlook through Nov-Jan suggests above normal rains across N Argentina and S and C Brazil. This does not suggest any critical crop issues in S America in the first half of the growing season.
- To conclude, the current price premium which continues to persist in nearby soybeans and meal is causing us to scratch our head. Given record US and S American stocks, which does not appear to be disputed anywhere, and the strong correlation between W Hemisphere stock/use and prices, something has to give before long. Panic soybean meal buying and the historic carry out tightness in soybeans does warrant a premium but we cannot help but believe that sub-$9.00/bu soybeans will be a reality at some time in very early 2015 (neck on the line Jan/Feb, latest March) as global demand switches to S America.