Soybean traders are starting to transition more heavily from South American crop fundamentals to the upcoming U.S. crop. The big debate is obviously planted acres and specifically how big of a record soybean crop U.S. producers are going to plant.
Most inside the industry agree that soybeans make more financial sense for many producers this year than compared to previous years as insurance revenue guarantees pencil in an advantage. So it's not really a matter of if we will see record soybean acres planted in 2017, but rather how big of a record will be set?
Most sources I speak with seem to be looking for an additional +4.5 to +6.5 million more soybean acres in 2017. I'm personally leaning towards the high side of those estimates and looking for a planted soybean number somewhere between 89 and 90 million acres.
As for South American production, there continues to be more buzz about traders and analyst bumping their estimates even higher. From what I can gather, most sources are talking about South American production being record setting and some +12 to +16 MMTs larger than last year. Previously the trade was thinking production could exceed last year by +10 MMTs.
The only real bullish South American headlines I've heard traders talking about the past couple of days are potential heavy rains moving into the Argentine forecast in the coming weeks. This could obviously delay and create hiccups in logistics. There's also some talk about a dockworker strike at their largest port of Rosario scheduled for March 30. There's also a labor union strike scheduled for April 6.
The bulls argue just because record crops are being harvested, it doesn't mean Argentina or Brazil will be able to get the bushels out of their country in a timely and efficient manner. Perhaps leading to more U.S. demand than the trade is currently forecasting? From a technical perspective, traders continue to talk about stronger support in the $9.40 to $9.60 range in the old-crop MAY17 contract. As for the new-crop NOV17 contract most sources see heavy support in the $9.60 to $9.80 range.
As both a producer and a spec I continue to remain extremely patient, believing there could be more nearby downside before entering a U.S. weather market.