Soybean farmers are now the most short they’ve been since October of 2012. This means that U.S. farmers who are able to take advantage of South American misfortune stand to have their best year in quite awhile. There’s no question that South American production is not going to pass muster. However, in an interesting twist of fate, the same weather that kept us out of the fields this spring is going to be a boon to late planted soybeans heading into a La Nina fall growing season. Therefore, we view this last leg up in the soybean market as a selling opportunity rather than the emergence of a new trend.
The soybean rally has been driven by two primary factors – South American production concerns and Chinese demand. Today’s piece will be heavy on the data and light on the dialogue. However, I do want to tie into last week’s article on new Chinese commodity traders and the effects of Chinese governmental policies on free markets as well as the impact of our own crop insurance programs. The sum total of the analysis justifies the tremendous amount of producer selling we’ve seen and makes a strong case for selling soybean production ahead of the coming US seasonal peak.