New Podcast: John Payne and I have out a new podcast. We talk about the soybean market and the interesting dynamic between an abundant old crop supply and a potentially tight new crop supply.
Soybeans: The more we look at last week’s WASDE report the more bullish I get on Soybeans this summer. I hear a lot of fundamental analyst arguing if old crop is 400mm bushels, beans should be under $10 and maybe under $9. I understand the argument but new crop is projected to be 305mm bushels and if we lose production due to planting delays or hot/dry summer weather, the new crop supply could go from adequate to tight in a hurry.
Unlike corn and wheat, the global export supply of soybeans is only located in two regions (mainly three nations). The US, Brazil, and Argentina make up a majority of exportable soybeans and soymeal. If there are issues in one, both, or all regions it has a major effect on US and Global supply. That is not the case for corn and wheat. Plenty of nations outside of the US can produce corn and/or wheat and there is a lot of redundancy in the global grain production and exportation of corn and wheat. This makes corn and wheat less sensitive to US supply shocks when compared to soybeans.
In my opinion I see Prince Soybeans taking the crown from King Corn over the next couple of years. The US will still have a competitive advantage of producing soybeans over much of the world, an advantage the US used to have with corn and wheat and now do not. Demand for soybeans should continue to have real demand growth as the world’s population becomes wealthier and protein consumption demand increases.
I like buying Soybeans on the breaks. In our last newsletter I said I liked July Beans at $10.60 and I still like that level if we get there again. Soybeans made a higher close today and we will see if that triggers more fund buying this week.
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