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Bulls are Getting Excited


Soybeans bulls continue to believe the market will eventually test the early 2013 new-crop soybean prices set at $13.50^6 on Feb. 4. Bears might be laughing, but as of right now I wouldn't rule this out of the realm of possibility. Especially as more and more producers talk about soybean acres that simply are NOT getting planted. After being on the phone extensively the past few days with producers across the country, I am definitely second guessing my original thoughts of 1 to 1.5 million more soybean acres going in the ground. In fact I am starting to wonder if we will even reach the USDA's current estimate of 77.3 million acres planted.

Moral of the story: I am becoming more bullish as each day passes. The recent "major" tumble in the U.S. dollar is also reason to move toward a more bullish tilt. Do realize the U.S. dollar has now setback to levels not seen since early February. I know many traditional “supply and demand" traders will tell me I am nuts, but when the U.S. dollar first started to stumble (around May 23-24), it was the exact same first time NOV13 beans decided to break out of the upper-end of their trading range at $12.40.

My point is: several stars are starting to move into alignment. Not that they are there as of yet, but certainly moving in that direction, i.e.: bullish production headlines based on weather complications in the US; talk of the Brazilian soybean crop estimates moving lower (CONAB cutting another 200,000 metric tons from its estimate, now more than 2 million metric tons below the USDA); more bullish technical patterns stirring the interest of trend-following funds; a weakening U.S. dollar fueling thoughts of a more "risk-on" type environment. Bears need to be careful dragging their feet. 

Corn, in my opinion is starting to become more concerning, as well. Not only are there going to be more prevented planting acres taken than I first imagined, but now the top-end of the yield in many good production areas are in jeopardy. Here are a few thoughts I have continually heard as I have made the rounds the past few days: 

  • We are definitely going to take prevented planting. We would be a fool not to take it. After three or four years of poor production and taking a hit on our APH in each of those years, why would we gamble this late in the game? If we have a 180+ APH, why gamble on the late planted corn possibly only yielding in the 130s, negatively impacting our APH even further. Taking the prevented planting provides us with good income, no risk to further damaging our APH and no major crop headaches. 
  • Weeds are becoming a major problem. The corn is really starving for nitrogen and the weeds are becoming major competition. Weed control, or lack thereof, is ultimately going to affect yields. Corn doesn't like competition for food at this young stage of the game. With even more rain in the forecast it doesn't look like spraying weather any time soon. 
  • Corn conditions in the heart of the Corn Belt depend on the last 10 days of rainfall. If the field has gotten 5 in. or more of rainfall then the corn looks really crappy. If the fields have had less than that amount, then producers feel as if there is still a chance to hit a major home run. 
  • Corn in many parts is starting to turn an ugly yellow color. We have learned through the years that once the corn turns this color it is extremely tough to bring the plant back anywhere close to full-yield.

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