Special Market Update

Grain Market Commentary

Monday, December 4, 2017

By Risk Management, The Andersons

Soybeans Rally a False Start or Real Problem?

Monday the soybean market had one of the bigger percentage moves we have seen on a Sunday night open since the summer growing season. The market wasn’t satisfied with weekend rains in Argentina and an extended forecast that offers little relief to dry growing areas in Argentina. Is this move the start of something bigger or a false start for South America growing season?

We believe it is more likely to be a false start given the broader soybean fundamentals. The potential supply at risk in Argentina can easily be covered by the Brazil crop and carryover US supplies. Brazil’s private estimates are already being increased 1-2mmt and given last year’s production, Brazilian soy production has significant room to the upside given weather outlook today.

If the Argentina weather problems persist it would appear to be more of a meal flow change (less Argentina Meal and more US/Brazil) than a supply side squeeze on beans given what we know today: beans supplies are plentiful. The bean supply side is plentiful enough to pay full storage plus some interest to carry soybeans in the coming months, as the January to March spread ticked 12cts today. If soybeans were in true production danger from Argentina weather the market should send a different signal than paying for them to be stored for the coming months.