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07-18-2013 07:59 AM
Soybean bulls continue to talk about the current USDA estimates being too high for new-crop production. Not only do they believe the acreage number is high, but also firmly believe the 44.5 bushel per acre yield is overly optimistic. The folks over at Lanworth seem to be in agreement, lowering their most recent soy production estimate by 45 million bushels, down to 3.315 billion in total production vs. the USDA's current estimate of 3.420 billion bushels. I am not saying whether they are right or wrong, but if you start whacking 100 million off the production number, I can assure you the trade is going to start getting real nervous staring at another sub-200 million bushel carry.
Keep in mind, all it takes is the current USDA yield of 44.5 bushels per acre to drop to 43 bushels per acre and the Lanworth estimate becomes right on target (assuming the USDA's harvested acres of 76.9 million holds up). As I mentioned up above the bulls want to argue the "yield" will be more like 41.5 bushels and "harvested acres" will be closer to 76 million due to late planting and fewer double crop beans going in the ground because of the late wheat harvest (thoughts are of the 8 million double crop acres, 1 million never got planted, and others may produce poor yields).
If this plays out, then all of a sudden we are looking at total production of around 3.15 billion and the potential for a NEGATIVE ending stocks number! The problem is if this does happen, prices would rally to more extreme levels and quickly start to ration the current optimistic USDA demand estimates, hence ending stocks would not end up in the "red." It would however give producers an opportunity to price more new-crop soy at better profit levels.
If your waiting to price more bushels and reduce more new-crop risk, like I am, then this is what we are cheering for. For those who are short call premium, banking profits and moving to the sideline sounds like a safe bet, at least for the interim. No I am not turning wildly bullish soy, I am just letting you know what cards we need to see come out of the deck to get higher prices. And we need this to happen sooner rather than later. Several very reliable sources in the trade are still predicting sub-$10 soybeans by October. Therefore keep your hedges in place.
07-18-2013 08:08 AM
OK - much better. Thank you. And thanks for the report! There is some good worthwhile information here, and maybe I'll take a looksie at what your selling.
07-18-2013 09:41 AM
"My guess? 2.95 billion bushels of beans...........but it could be less."
Now, here is an honest man. It's a guess and he says so.
Poor USDA never made a prediciton in it's history. It always makes projections - which are quite a bit different - but everyone says it is a prediction and therefore makes bad managementn decisions and then blames the USDA.
07-18-2013 09:47 AM - edited 07-18-2013 09:53 AM
Still, projections made using optimistic production scenarios are a disservice to farmers. At each point in their projections, USDA could be more realistic by using the highest probability scenarios from beginning to end, updated each time they make their projections.
07-18-2013 10:14 AM
Excuse me if this has been asked before,
Is there a chart or statistic that compares USDA 'projections' to actual numbers over the years?
Perhaps a trend would appear when things needed nudged in a certain direction...
07-18-2013 10:16 AM
How about instead publishing a real world estimated that would involve the possibility of some weather event, instead of a report that is probably going to be uncontainable but the market sees as in the bin, trades it that way, and has the potential to cost farmers millions of dollars that they are then unable to recoup because the trade hides behind the bowl of saying - Yup, we got plenty.
07-18-2013 10:19 AM
The USDA critera and methodology is clear and consistent.. What is so hard about all of this? It would be much more uncertain and subject to criticswim if the process got "adjusted" all the time so the market wasn't ever sure what the basis of the projection wss.
Farmers who believe they have better information than the trade in regard to the yield outcomes should be rubbing their hands and chortling with glee as they make a killing in the market. It should be like shooting fish in a barrel. At some time the trade comes back to the cash. The farmer should not have a problem picking a trading date that will make that certain to work in their favor, often after harvest or at the most at the end of the crop use year, such as autumn for corn/soybeans.
07-18-2013 10:26 AM
What you see as an unproven and unprovable conspiracy theory is much more likely to be farmer-producer hedging and trading incompetence and sour grapes. It's always easier to blame one's misfortunese on the evil spirits rather than on one's own failings.