Soybeans look to reverse last week’s trend entering the weekend by going higher rather than lower from Sunday night into Tuesday’s June USDA stocks and seedings report. The five to seven day forecast has three to nine inches of rain across the Midwest. This does two things. First it suggests planting progress slows down and second that crop conditions decline. Tuesday’s final planted acreage report and stocks on hand report estimated 2015 US soybean seeding at 85.1 Mil acres with harvested acres at 84.4 Mil acres. This was right at trade expectations and it compares with the March planted area estimate of 84.6 Mil acres and harvested at 83.7 Mil acres.
Traders are likely trimming an additional 1-2 Mil acres off the NASS harvested soybean estimate due to the recent extreme wet weather across the E Midwest. The US 2015 soybean seeding rate is record large and with a trend yield of 46 BPA, it would produce a record large US crop of 3,882 Mil Bu. Such a crop would be well above USDA projected use of 3,734 Million Bushels. For new crop soybeans, WASDE is likely to raise their soybean residual by 25-35 Million Bushels and drop stocks by a like amount to 295-305 Million Bushels. If US soybean exports are raised 15-20 Million Bushels as expected, 2015/16 US soybean end stocks would be pegged at 270-280 Mil Bu. This was the bullish surprise which started the dramatic rally in CBOT soybean futures on Tuesday.
Returning to weather; excessive rain should create fear that acres will come in unplanted and stocks lower as we have been overselling old crop beans. Traders will be looking to sell rallies off of these bullish reports as not to take long positions home with a long Fourth of July holiday. Ninety percent of the pricing influence for soybeans is weather and its impact on planting and early crop emergence. Long holiday weekends can see the weather flip flop several times creating risk. The final two days of this week is the time to sell rallies. Soybeans rallied over 50 cents across the board after Tuesday’s report, the biggest rally of 2015 by far.
For those looking at a short term options play I would propose buying the August bean 10.00 put for seven cents or better. The risk on the trade is the cost of the trade plus all commissions and fees.
For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 pm central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for next week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
