Not much has changed fundamentally, which is not great news for soybean bulls. There has been a lack of threatening weather in the Midwest for a while now, and with the calendar turned to August, the chance of soybean yields taking a big hit due to weather is rapidly declining. New-crop production is still in reasonably good shape in most areas throughout the Midwest. The only risk right now is an early frost.
For now, we are sticking with our expected average yield of 51.5 bushels per acre. Too early to make any changes in that estimate. That would still result in a carryover supply of 430 million bushels and a stocks-to usage-ratio of approximately 10%. History would indicate that should result in an average price of about $11.00 per bushel and with November soybean futures currently trading at $10.12; the market is underpriced.
One positive note is that after an extremely slow start to its soybean purchasing for 2024-25, China has bought U.S. beans each of the past two days according to USDA.
This is a market closer to a bottom than a top. Not a place to panic now. The train left the station last December and it is now too late to jump on. At this stage, one needs to wait for the next train.
Technically, soybean meal futures appear to have made a bottom. Soybean oil has not. In both products, however, we would rather be buyers than sellers at this price level. Don’t panic.
Buyers of soybean meal, however, should be adding to purchases. The upside risk in prices outweighs the downside potential.
Cash-only Marketers’ Strategy: Old-crop sales were wrapped up long ago at an average price of $13.42. New-crop sales are at 40% at levels significantly higher than where they are now.
Hedgers’ Strategy: The crop harvested this past fall fortunately is 100% sold at an average of $14.11. Hedge profits were 80 cents per bushel on 100% of the crop. Thirty percent of the new-crop has been contracted and 20% is still being held in short November futures. Sit tight for now.
