Weekly Soybean Review

(Farm Futures) – The soybean market sputtered last week, with old crop futures breaking trend line support on disappointing news about exports and fears of imports. But the process of rationing demand to keep the U.S. from running out of soybeans this summer has only just begun, and with it, what’s likely to be more of this back and forth movement.

Arrival of a couple more ships from South America won’t break this market, not yet. As many as 20, perhaps 30 vessels may be needed to provide beans for processors until early harvested 2014 supplies arrive.

The drama likely won’t show up on USDA’s updated old crop balance sheet on May 9. The agency may make few, if any changes to its forecasts for 2013 supply and demand, keeping carryout around 135 million bushels. But the government’s first monthly forecast for 2014 could remind the trade of what lies ahead if growers enjoy good yields this year. A crop of 3.52 billion bushels is a starting point, with potential for larger yields possible.

Demand is the other question mark for new crop. Chinese imports should again drive usage, but there’s potential for our largest customer to stumble if efforts to revive growth don’t take root. Chinese demand for beans is directly related to its economy, which is slowing down, perhaps dangerously so.

Still, November futures should find support from tight old crop supplies until more is known about the condition of the 2014 crop. The July/November spread appeared to reject one move to break it below long-term support, but a rising old crop tide should help new crop some.

The important thing is to manage the downside risk, which could be $10 or lower futures – while keeping some upside open. Having 35% to 40% of new crop priced by mid-May appears to be the best way to handle this uncertainty. This seasonally is a good time for selling, even if November appears to be following a bullish trajectory.