Most seem to be thinking the USDA will push the yield estimate north of 42 bushels an acre, but will offset a large portion of those gains by reducing the "harvested acreage" number and slightly increasing overall demand. Longer-term the trade will start to focus on the South American crop.
The bears will be quick to point out, baring any significant weather hiccup, that South American producers could harvest an additional 20 million metric tons of soy in early 2014. That would obviously come on top of the additional 30 million metric tons harvested this year. Net-net an additional 50 million metric tons of soy in comparison to 2012 harvest is getting tough for the bulls to swallow. Obviously the crop still needs to be grown, but with more rainfall popping up in the South American forecast bullish production talk is fairly limited.
Keep in mind, despite all the whispers and rumors, Brazil seems to be making good progress planting. Most insiders have Brazilian soy planting progress at between 32 and 38% complete. Mato Grosso (the top producing state) is well over 50% complete...not bad!
There is also some talk among the bears that Chinese demand during Nov/Dec might not be as strong as some were thinking a few weeks back... Yes, more than last year, but just not as much as some of the big bulls were hoping to see. Technically, the bulls are needing the $12.50-12.60 area to hold as major nearby support. Fear is that a close below $12.50 could prompt many longer-term bulls to throw in the towel. Remember, the funds are long close to 150,000 soybean contracts right now. If they were to give up on these positions and liquidate, it could bring on an unhealthy wave of additional sell pressure. This is certainly something I will be monitoring in the days ahead.
Soybean harvest is slightly below most analyst estimates with 77% now reported as "harvested," basically right inline with our 5-year average: LA now 96% complete; NE 94%; MN 91%; MS 89%; IA & SD 87%; IL 85%; OH 81%; IN 78%; KS 75%; ND 73%; WI; 69%; MI 66%; AR 60%; MO 51%; KY 38%; TN 36%; NC 11%. Keep in mind this now puts IL +8% ahead of their average soybean harvest pace; MN +3% and IA +1% ahead.
As I alluded to this past Friday, the tumble to the downside in US soy prices could be quick if the cash basis starts to slip. The bears are worried that as Chinese margins start to slip and US exporters get there hands on more bushels prices could temporarily set back. I am still thinking it is only a temporary setback as supplies tighten back up a few weeks down the road.