money in soybean field Simazoran/Getty Images

Could China be forced to import soybeans sooner than later?

All eyes are on the yield forecasts for now.

Soybean bulls are happy to see prices again slightly higher, stabilizing and finding support at or above $9.00 vs. the NOV18 contract. Nearby technical resistance is seen in the $9.20 to $9.25 range. A close above that area opens the door to $9.50.

There seems to be more talk circulating that China will have little choice but to import U.S. soybeans sooner rather than later. There's also more talk that heavier Chinese buying of meal from Argentina, will eventually force Argentine crushers to source more soybeans from the U.S. In other words the "demand" story is slowly swinging back towards the bulls. U.S. production is still somewhat of a wild-card, but most inside the market are forecasting a jump in yield by the USDA in their Friday report.

The USDA currently has the yield forecast at 48.5 bushels per acre. Based on weather and overall growing conditions, most believe that number is going to push higher by perhaps +1.0 bushels per acre. There's actually some inside the trade who believe the USDA is ultimately moving the yield north of +50 bushels per acre. In the process, U.S. new-crop ending stocks will probably again push higher from the current 580 million to over 630 million, a jump of +50 million bushels on increased production.

Keep in mind, the USDA is also trying to juggle the uncertainty now surrounding export estimates. Who really knows how that ball bounces in the weeks ahead? I'm staying mostly neutral heading into the report. I suspect if we catch a bearish surprise and the market breaks aggressively, I will look to be a longer-term spec buyer.

As a producer, I will probably take a shot at some small re-ownership. Remember, I already have over 60% of my estimated new-crop production risk removed. A bullish surprise to the upside and I will continue to hold and do nothing. I'm not in a hurry with this market. I still see it as a dangerously volatile market with many extremes directly attached and tied to Washington's ongoing negotiating tactics. Without knowing how this story ends, it makes it difficult to forecast prices nearby. 

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