February 24, 2014
Global soy futures soar to new recent highs
Driven by strong exports, soy rallied to new recent highs, with corn and wheat also pushing up in the past week, with demand the last few months cutting into ending stocks levels of wheat, corn, and soy.
Soy has a "W" formation on nearby charts, and now has broken to the upside of that formation, which makes it look like old-crop soy still has some life in them.
The South American weather remains mostly favourable for most crops in northern and central Brazil, while soy prices are running higher on strong US demand from exports. Southern Brazil and Argentina have had crop stress at intermittent times over the past few months, but recently good rains have fallen in these previously dry areas - keeping crops from declining much in yield potential.
The rainfall and warm temperatures ebb and flow back and forth among South American producers in the south, with Argentina and southern Brazil taking turns experiencing dry periods along with warm temperatures over the past few months. The amount of crop that has been damaged in the south is still up for debate, but thus far whatever losses southern areas have experienced seem to have been offset by improvements in northern Brazilian crops.
It appears that old-crop soy is rallying to try to cause cancellations in old-crop soy sales, as the US has already sold more soy than we are projected to export in this marketing year. So the market appears to be rallying to try to get some of those sales cancelled. In fact, we''ll need significant cancellations to avoid having a shortage of old-crop soy on hand at the end of this year. That could take some significant price movement, though, since the Chinese so far appear reluctant to make those cancellations.
While soy prices have a reason to rally to slow US export sales and shipments, wheat and corn prices are also rising recently, with corn running to nearly US$0.45 gains since the January final report, to wheat gaining back about US$0.60 to the US$6 March area. These are all nice rallies, and the demand side for these two grains is also helping to push prices higher. Corn demand from exports has recently cut into ending stocks estimates, and that is a positive affecting these two markets.
So we currently have an improvement in price outlook for grains as we move into the late-spring time period. This is typically an improving period of time for grains, as we typically rally into spring to provide incentives for farmer to plant a little more acreage. Soy especially need to attract acreage as the long-term 10-year forecast for soy was released last week, and it indicated only a 1.5 million acreage rise in 2014 for soy. So we''ll need additional soy acreage to survive any crop scares next summer, so the job of the market is to attract more acres into spring to soy.