soybeans

Any bullish soybean story may be late this year

The poor crop conditions doesn't correlate with the projected yields so the market isn't rallying.

Soybean traders are a bit surprised to see weekly crop conditions once again deteriorate, falling from 60% down to just 59% reported "Good-to-Excellent". This drop in conditions comes just a few days after the USDA surprised the trade by raising the national yield from 48.0 to 49.4 bushels per acre.

In other words the weekly crop conditions are deteriorating, now at 59% "Good-to-Excellent" vs. 72% last year, but the USDA's just reported their highest ever August yield forecast at 49.4 bushels per acre, actually higher than last years August estimate of 48.9 bushels per acre.

As I mentioned above in the corn commentary, the powers that be have told me time and time again that there's no real correlation between the weekly crop-condition opinions and the more objective yield forecasting that is delivered by NASS in the monthly report. Hence, we can jump up and down and yell until we are blue in the face, but the market continues, and obviously prefers, to trade the more objective monthly NASS numbers, which include farmer surveys, satellite imagery and samples taken directly from the fields.

Again, weekly crop conditions are much less science and research based and a lot more opinionated than the NASS monthly estimates. This is probably why the market is fairly quick to discount the weekly opinions and more apt to trade the monthly forecast. As I've said for several weeks, I wouldn't be surprised to see the NOV17 contract test the $9.00 to $9.20 range. To the upside, it seems like the $9.50 to $9.60 area has now become nearby resistance. As a spec, I still remain patient in looking for an opportunity to dip a toe in the water as a longer-term bull. I can both see and understand the possibility of a longer-term bullish story, but I still have a hard time with current market timing.

The South American crop is record large, the Chinese crop is forecast to be bigger than last year, U.S. demand headlines might backpedal a bit during the second half of 2017, and the record number of U.S. planted soybean acres are probably going to get even larger. Oh, and did I mention, the USDA just recently forecast the largest August yield estimate in our nations history. Record acres and record yield headlines are extremely tough for the bulls to battle day in and day out. In other words, I see no need to get in a hurry, we may have to get past the U.S. growing season before we are able to sustain a significant rally.

As a producer, I want to continue keeping my hedges in place and stick with my longer-term "wait-and-see" approach towards marketing any additional cash bushels. Weather looks bearish nearby as timely rains and cooler than normal temps limit crop stress in many key locations. Iowa remains highly variable and uncertain, but some nearby rains could help stabilize and improve the finishing efforts of the crop. The extended forecast still brings some uncertainty as temps warm back up and moisture becomes more limited.

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