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Comparing soybean bull markets

Comparing soybean bull markets
A look at the summer 2021 versus 2012 and 2008

How high can this soybean market run? Great question. Heading into the June 10, 2021 USDA WASDE report, the soybean market is at a cross road for price. A bullish report would likely send the market into new price high territory.  A bearish report would send prices quickly back down to the May lows.

I can’t help but wonder, how could this June report be overly bearish or potentially overly bullish? Goodness gracious, the old crop ending stocks are already pegged at the third tightest in history, and the stocks to use ratio for old crop is tied as the tightest, ever. Old crop export sales and export inspections have been strong overall, with crush demand strong as well. The USDA hasn’t made any significant adjustment to old crop carryout for a couple months. Will they finally adjust numbers on the June report? The cash market still screams positive basis for most of the Midwest, and many producers I talk to have NO old crop available to sell onto the marketplace.

While past performance is not indicative of future results, I go back and compare what the USDA did to old crop ending stocks in other bull market years, when comparing the May report to the June report (and even to the July report). I looked at the past big rallies of 2012 and 2008.

June 10 Slide 1 (002).JPG  

June 10 Slide 2 (002).JPG

June 10 Slide 3 (002).JPG

June 10 Slide 4 (002).JPG

In 2012, the USDA did decrease ending stocks from the May report to the June Report. That reduction for old crop ending stocks then resulted in tighter new crop carry-in for the new crop year. Comparing the June to July report, demand destruction occurred for new crop thanks to higher prices. However, the drought of 2012 reduced supply, which resulted in tighter ending stocks overall.

June 10 Slide 5 (002).JPG

In 2008, the USDA also did decrease ending stocks from the May report to the June Report. Heading into the July report, demand destruction was noted, yet the new crop size got smaller, with the net result being tighter ending stocks.

As I said before, past performance is not indicative of future results, but if I had to hypothesize, the USDA may throw out a “friendlier than expected” June USDA WASDE report, with stronger demand noted for both exports and crush. And going forward, due to the imperfect start to the 2021/22 growing season (drought, frost, heavy rain, high heat, not enough rain in some places) we likely will NOT see trendline yield nationwide for this growing season. Buckle up friends, it is going to be a wild ride.

 

Reach Naomi Blohm: 800-334-9779 Twitter: @naomiblohm   and [email protected]

 

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