Every day I tell farmers that the soybean rally feels like it is over. Almost every day the prices climb a little more.
My customers are starting to wonder if I just tell them that to scare them into selling.
The soybeans are still going up. Instead of bouncing against the old high and coming back as I expected, they have continued to rise, driven by the continued dryness in Argentina.
I keep thinking that harvest progress will get to the point we will hear that yields are not as bad as advertised, and then prices plunge.
Add to that fear the fact that we may end up paying for foreign policy decisions, and you see why I am skittish.
The truth about the Argentine harvest is not known yet. What is known is that we tend to exaggerate fears, and the futures markets tend to over-react on the unknown, then correct as real facts surface.
This pattern has me assuming that the day will come when the Argentine harvest is reported in actual bushels instead of fear-induced estimated bushels, and the price will be lower.
In addition, the market will start to remember that the big soybean player is Brazil, and their crop, while affected by excessive rain, is still expected to be a record.
Preliminary numbers this week have Argentina at 48.5 million metric tons (mmt) as an average estimate. In February USDA had estimated 54 mmt.
On the other hand, Brazil guessers put that crop at 113.9 mmt, against the February estimate of 112 mmt.
The current accumulative U.S. exports are a little negative, with 1.424 million bushels exported so far this marketing year, versus the 1.63 million bushels of last year at this time.
The biggest factor in the soybean market may be changing from the Argentine crop to the Chinese imports.
President Trump has announced steel and aluminum tariffs on imports, so the Chinese may react with an attack on our soybean exports to them. That is not a pretty thought.
On the other hand, the Chinese may limit our imports, but they will buy from someone. We are all in a world market, so, in the long run, it does not matter.
We will get business from someone who switches origins from Brazil to us. At least, that is the hope.
If this is true, the foreign policy will not cost us this time.
Looking at the numbers, we see May soybean futures down almost 3 cents this Tuesday morning, at 10.74 3/4.
The high was March 2 at 10.82 1/2. That represents a gain since the low of Jan. 12 of almost $1.27.
Consider that amazing, especially for this time of year, which is normally negative because of the South American harvest.
At the same time, November soybean futures have gained 77 1/2 cents to the 10.44 3/4 high overnight. It is normal for the big rallies to affect the nearby contracts the most.
We see the same effect in corn futures, where we have a May futures high of 3.88 1/2 recently, up almost 35 cents since that same Jan. 12.
At the same time, December new crop futures have gained 25 3/4 cents to a high March 5 at 4.06.
It is easy to say that the corn has gone higher in sympathy to the beans, and I have said it. However, there are additional fundamental factors.
We are seeing good exports and good ethanol production. We are expecting the Argentine corn crop to be lowered by the dry weather there.
Also, the Brazilian second crop (safrina) of corn is seen to be lowered by late planting that will likely end up short of normal. Sixty-three percent of the safrina is planted instead of the normal 75, and time is running out.
The wet weather in Brazil has also slowed the first corn harvest, which is at 24 percent instead of the 29 percent of just last year.
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