Soybean traders are paying close attention to politics in South America. Argentina has had a series of economic woes and is in the midst of a complete meltdown. Brazil continues to struggle with logistical issues and trucking complications. We also have the first round of the Brazilian presidential election now 30-days away, and the leading candidate, 63-year-old far-right former army captain, Jair Bolsonaro, stabbed during a street rally in the central state of Minas Gerais yesterday afternoon.
From what I understand, he was stabbed in the stomach while he was being carried through the streets of the city of Juiz de Fora by his supporters. Insiders are saying this could bring about some sympathy votes and almost assures Bolsonaro a final spot in the second round later in October. Even though he's a controversial figure, he seems to be fairly popular with many investors because of his free-market approach to the economy.
The Brazilian currency was stronger following the news, but who knows how it plays out. The point I'm trying to make, is the fact there are many many non-traditional moving parts right now influencing soybean prices. Keep in mind, the market is also trying to digest all of the headline uncertainty involving trade negotiations between the U.S. and China. This makes this market extremely difficult to forecast right now.
The traditional fundamentals continue to paint a burdensome supply side story. There's talk among the bears that the U.S. yield could perhaps push closer to 53 bushels per acre and ending stocks up closer to 900 million. I should note, Informa, bumped their soybean yields estimate to 52.9 yesterday. Meaning even if we factored back in Chinese demand (+250 million bushels) we would still be chewing on burdensome supply numbers. The market would obviously bounce on the initial headlines of China coming back in play, but I'm not so sure after the initial knee-jerk, we would be able to hold the gains.
I'm certainly concerned looking out on the horizon. As a producer, I was blessed to get over 60% of our new-crop priced early and at great levels, but I still need to market the remaining. I also have 0% sold or priced for next year, which is very concerning. As I've mentioned several times, I just don't see a "V" shaped recovery like so many have been forecasting or hoping for.
I feel like we are going to be more "U" snapped or perhaps "W" shaped. Next week's USDA report should tell us more about supply, but I'm thinking we are still a ways off from any type of resolution with the Chinese.
The opinions of the author are not necessarily those of Corn+Soybean Digest or Farm Progress.