Soybean bulls point to hot and dry weather in Argentina, especially in the key production areas of Buenos Aires. Along with slow farmer selling, the Argentine weather uncertainties are causing traders to question their domestic crush numbers and if Argentina will be able to supply demand from the global buyers?
Bears are pointing to better-than-expected weather and total production starting to be harvested in Brazil. There's some talk by the bulls that the recent rains might slow the Brazilian harvest, which one could argue might add to the nearby tailwinds as it could somewhat limit available South American supply. Bears acknowledge the Argentine weather complications but believe the amount of risk-premium that's being added might be a bit aggressive considering the burdensome balance sheet.
Overall, however, the traditional fundamentals remain burdensome in comparison to current price. With 450-500 million in U.S. ending stocks and thoughts of record acres again being planted in 2018, it's tough to justify prices north of $10.
Let's also keep in mind this is a critical week for NAFTA, where negations have resumed up in Canada. From what I'm hearing, the odds of the U.S. pulling out completely appear to have decreased a bit in the past few days. Again, we've learned there are no guarantees or ways of forecasting how these trade deals will play out with the new administration so make certain you are closely monitoring the headlines.
I still believe longer-term the politics will all work out for the best, but we have to understand the momentum and headline trading community will be extremely quick to react on the release of any game-changing information. Make sure you are thinking about your next move... What will you do if the headlines report the U.S. has opted out of the NAFTA agreement? Do you have hedges in place to protect the downside? What if the headlines report something extremely positive in the way of a trade agreement? Do you have sell orders in place to reduce longer-term risk in case we catch a big bounce higher then fade back following the news?