Soybean

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Position

Grain Marketing: 100% sold on old crop. Filled (5/7): $12.00 July short dated put (ex. 6/21/24), on 25% of new crop. Speculative Trade Recommendation: (7/2) Stand aside.

In our opinion, current prices have moved from economic value (1060 - 1080) and are now below value. The market's higher confidence of a Trump presidency has given a psychological discount (trade war). We have now met our view of Economic Value, our downside target from the Similar Year study and the minimum 2024 trading range from the Trading Range study.

USDA reported an unknown buyer procured 105,000 tonnes of US new crop soymeal.

Reuters newswire carried a story reminding the trade China's July soybean imports, from Brazil, will be quite large. Given the concerns about their economy and lightly lower levels of pork production this does not bode well for US new crop exports in the coming months.

Safras e Mercado left their 151.5 million tonne soybean harvest estimate unchanged in an update today. They did offer a 171.5 estimate for the 2025 harvest. These estimates are under USDA's 153.0 old crop view but over their 169.0 new crop view.

As they do every third Thursday of each month, the Climate Prediction Center issued updated long term weather forecasts. For the 30 day period ahead, reaching into mid-August, all of the US will remain with the general trend this summer of above-normal temperatures. Our below normal temperatures shown on the two week forecast may be limited, but quite beneficial in this period of time that determines yields. For moisture they see  all of the Midwest has normal except for Southwest South Dakota, Nebraska and Kansas. They hold below normal. With this forecast ahead, and at a key yield determining time, our yield view is “slightly below trend, trend or slightly above trend”. The easy claim is that the East is set for above-trend. How much it offsets the mixed yields in the West is a question.

The CPC's August - October view of weather also shows the above normal temperature view. The East will remain with normal moisture. The West will see almost all areas with some measure of below normal moisture.

The weather forecast is positive for the Eastern Cornbelt. Temperatures are forecast to drop to below normal. We are now seeing the extended forecast return back to above normal now. Moisture is seen above normal. The two week rain forecast runs generally 1.2 - 3.0 inches in the East. The Western Cornbelt will see light problems. Above normal temperatures will be seen. Below normal moisture is also seen for Northwest areas. Kansas through North Dakota will see 0.3 - 0.7 over two weeks in most areas. Select limited areas may see 1.7. Missouri through Minnesota may see 0.6 - 3.0, quite varied though.

With the recent unsuccessful assassination attempt of President Trump, and polling now moving firmly into his favor, the trade is showing more interest in pricing in risk of a Trade War. In the 2018 and 2019 marketing years there was a period with minimal Chinese buys of US soybeans, 13.4 million tonnes and 16.1. The prior three years ran 28.2 - 36.1.

USDA lowered old crop ending stocks from 350 million bushels to 345. A minor 5 million bushel decline in their import estimate was noted.

USDA lowered their prior new crop ending stock view from 455 to 435 million. On this report the lowered acreage numbers from June 28 were incorporated. As routine in July, trend yields were used. That meant a production decline from 4.450 billion in June to 4.435. USDA was conservative with demand. No changes were made for crush or exports. The export issue is a concern. We have the lowest new crop bookings in 19 years. Though USDA’s reluctance against lowering exports is moderately okay at this time of year, there is a concern. The US does not have the usual discount vs. Brazil for the coming new crop bids. It is hard to expect a sharp increase in US new crop sales unless the trade takes serious concerns with South American production (La Nina). On the pricing side a 435 ending stock would imply about $10.95 for November futures. 450 and 500 stocks, more reasonable numbers in our view, would run $10.80 and $10.40. The best bull argument for soybeans is still months away, La Nina impacting Argentina specifically.

The Farm Service Agency collects farm program acreage. All but 2% to 3% of US corn and soybean ground is involved in the program. Expect the first release of FSA acreage numbers in August. This will be applied to the September 12 WASDE.

Updated Similar Year Study: The pattern of pricing in other larger supply years can often show us a shape of how the year may work out. November's prior 1122 ¾ lows from spring would then run up to 1238 for a peak. Harvest lows would run 1038. The peak turned out to be 1230 ½. That pushed the projected harvest low down to 1032. Our current 1031 ¾ cent low has met that target. We are not calling an official price low yet. Of note, this study would suggest a rebound into expiration to 1124.

Updated Trading Range Study: November soybeans typically post a good sized trading range between January 1 and expiration. Over the past 20 years that range has been from 133 ¾ to 811 ¾ cents. Earlier this year we started out with a view of a 200 cent wide range as a reasonable starting point. From the January 1 price high of 1237, to this recent low of 1031 ¾, we now have a 205 ¼ wide range for 2024. We have met our view of a reasonable minimum trading range. This is not a statement suggesting the exact low is in.

November Soybean Seasonal: 2024 November soybeans are following the general seasonal 15 year pattern quite well. This year's peak on May 7 was a little earlier than the June 8 peak from the 15 year analysis. If we shift 2024 price action back by 22 trading days the decline off the peak is matched up quite well. One question we have is if this year's peak was 22 days early does that mean our fall low will show up 22 days earlier than the norm on October 4? The bad news is aside from a moderate short term rebound shown on that seasonal chart, it would be short lived and sharp declines to new lows would be noted after. If there is a positive to this very bear argument, the sharp harvest low would come right at the same time as the market may start showing interest in the La Nina story for South America.

Economic Value: Allendale's pricing models suggest 200 million ending stocks implies 1400 futures, 250 stock implies 1295, 300 implies 1230, 350 implies 1160, 400 implies 1110, 450 implies 1080, 500 implies 1040 and 550 would see 1005.

Chart: The trend is down. New lows were made this week. Positive, we are no longer seeing clear selling days. This is a slight change in the prior pattern. When there is a clearer change there are some minor upside targets to note. Upside gaps on the intraday chart are at the 7/12 close of 1065 ¼ and the 7/5 close of 1129 3/4…Rich Nelson

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