Special Market Update

The delayed WASDE report turned out to be a dud with no fresh inputs one way or another. As a result, futures have started to slip back towards the bottom of the range.

The US and Chinese trade talks are not helping matters as they continue to drag on with no specifics. China did buy 5mmt of soybeans but that is really not enough to change the bearish outlook. More importantly, China has not yet lifted the retaliatory soybean tariffs.

We have plenty of soybeans globally with the latest stocks to use ratio pegged at 31%. It’s now looking like South American soybean production as a whole will be bigger year on year. South American bean harvest is currently in full swing and ahead of normal with 25% of the crop taken off. Safrinha corn is going into the ground under much better soil moisture conditions. African Swine Flu continues to spread in China which is just one more bearish fundamental.

The biggest problem for soybeans is the 2.4% new crop ratio. November new crop soybeans are hanging around the 9.50 area which is not discouraging acres in the US. At this point, you could argue that both crops end up around 89-90 mil acres. This would be supportive corn, but very negative soybean price. Corn has a much tighter balance sheet relative to soybeans with the US stocks to use ratio at 11.7%.

The March 29^th acreage estimates have the potential to be a huge market mover. From a producer perspective, the single largest risk right now are new crop soybean futures. It will be interesting to see if we do see “some” switching as a result of the wide soybean basis in many areas. Maybe the cash ratio is more important this year? In the meantime, there is plenty of headline risk on any given day with ongoing trade talks and the threat of another government shutdown looming.