Commentary

USDA left soybean yields unchanged from the month prior at 53.2 bushels per acre. Perhaps the market was relieved that the USDA didn’t put the ratings higher or near Pro Farmers guess at 54.9 and pushed higher on report day. Export sales last week showed China bought a total of 35.4 million bushels of US soybeans last week. This is what we need to see from a demand perspective week in and week out to close a sizable shortfall so far. Totals for the 24/25 marketing year total 523 million bushels to all destinations. That's the slowest start for the soybean marketing year export demand in 16 years if you exclude the 2019-20 marketing year when African Swine Fever had decimated two-thirds of China's hogs. This year’s slow start highlights in my view the growing reliance of South American beans into China from Brazil and Argentina. Our export pace is 160 million bushels behind schedule. We are a third rung on the ladder for meaningful export into China acting as just a supplemental supplier. This assumes normal growing seasonal weather in South America that avoids a major hiccup. Currently there is severe drought in Central Brazil following its dry season. Monsoon rains are set to return in October during its rainy season and forecasts will need to show a wetter pattern in my view closer to October with the rains then verifying or we could see managed funds that are short 150K contracts cover positions despite harvest pressure. Farmers in Brazil prefer to plant early in September than wait until October in some cases. drought so far has impeded progress so far. The M/O from China on their bean buying program usually works like this. It buys from Brazil and Argentina from late January until mid-July. They store some in reserves. From August on out they take some coverage from US origin knowing they can cancel our shipments early next year if need be and exclusively buy from South America. For the US to make up the gap of meaningful exports, we need a weather problem in Brazil or Argentina. We would then likely see US exports expand into China and put a floor into beans. A few final thoughts. First, I’m hearing that this late season heat and dryness in the Midwest just before harvest is taking the top off of US beans. I’m sure that could be the case in some areas, no argument. However, those changes should they occur and if acknowledged won’t show until the October WASDE or in subsequent reports. That said if we don’t have an increase in exports then the USDA will have to lower their export target, which for now is high at 1.85 billion bushels in my opinion. This would offset any late yield loss keeping ending stocks at a massive 550 million bushels. Second, it important to note that Argentine planting intention survey revealed intentions to increase planted area by 10 percent this season at the expense of corn. Technical levels for next week come in as follows. Support is at 999. A close under and its 985. Under 985 and the market moves down to 967/972. A close under 967 and we could see 950. Resistance is at 1021, 1031 and then 1038. If we close over these three levels, prices could breakout to 10.84. Hedge idea long term below.

Trade Idea

Futures-N/A

Options-Buy the May 24 10.00 put and sell the August 12.00 call for even money

Risk

Futures-N/A

Options-Unlimited as one is short an August call. This hedge idea should be used for producers only. It provides protection at 10.00 in the bans until late April. 

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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