"You took the words right out of my mouth"
At 9:01 Brazil time on Thursday, when the Conab report came out,
I was speechless.(I thought of Meatloaf at the time)
Never in the history of Conab have they ever
cut more than 7 million tons from report to report. The last time
was 2012, when the soybean crop was half as large as today.
I recently penned a newsletter titled "I was a bull when being
bullish wasn't cool" paying homage to Barbara Mandrell's
hit from 1981 "I was country when country wasn't cool".
This blog will be named "You can eat soybeans in my bed anytime"-
assuming you still have any ;>)
I wrote this in an old newsletter several weeks ago. I know many
people get lost when bouncing back and forth between millions
of tons and billions of bushels.
The USDA said last week that old crop soybean carryover
will be 300 million bu or 8 million tons. Pipeline is said to
be 150 million bu or about 4 million tons.
Brazil came into 2022 with 4 MMT of old crop soybean
stocks.
Brazil was expected to increase from 138 MMT to 145 MMT
this year or another 7 MMT. This is long gone.
Last week, Conab basically confirmed that 20 MMT of Brazil
soybeans is gone. I think we need to be weary of possible
found acres later on. If there are extra acres, they are up north.
(Could we find 1 or 2 mmt later? ). YES
Chronic rains in the north will keep pressure on soybean quality
in the month of February.
The million dollar question is: will continued dryness
in RGDS pull the production numbers even lower?
Possible- yes
The anecdotal item that has my ears perked up is the datapoint
that insurance companies in Parana are cancelling 2nd crop
corn insurance policies to farmers. Why?
Did someone poop in their pants when looking at continued
"La Nina" weather maps?
Maybe someone's testicles have not dropped yet?
If so, they have no business being in crop insurance
business.
With Paraguay talking 4 mmt which is down from 10-11 mmt
of potential. Uruguay will come in 1 or 2 million tons light.
Argentina is looking more like 40 MMT which is down
from 50 MMT to start with.
Bottomline is: USA can plant as many soybeans as she wants
in 2022. The market can take it all.
Brazil will likely only export about 80 MMT in 2022.
At one time, we were thinking 90 MMT.
With the profitable crush margins, Brazil wants to
try and crush 45-48 MMT in 2022 if they can find the
beans.
I think by Sept, USA will be down to pipeline stocks of
soybeans and by December, Brazil will have "Zero" beans
remaining in the country. Seed only.
Soybean market likely to be stimulated all year now.
There is no room for production hiccups
in USA in 2022.
If any threat of crop losses, the markets will be explosive
now.
I remember back to Nov 9th low in beans. I was saying this
should be a low and we should rally back to 13.15 at some point.
This seemed insane at the time.
Many experts were looking for 11,10, and even 9 dollar soybeans.
This next week, we will likely check out 14.80 again basis
Nov 22 soybeans. 14.80 always bothered me last year.
It did not act like a high.
If the high would have been 14.74 3/4, I would have been
the biggest bear in the world.
14.80 was a long term "hint". "I ain't done yet"
This is what SX was telling us 9 months ago.
There are always hints in the market. The problem is finding them
and looking for subtle signals that a novice overlooks as just
another fundamental number.
There are more to the markets than fundamentals. But, it seems
like it takes looking at charts for 30 years to be able to see them.
If we cannot trade 14.80 early in the week basis Nov 22, then I would
think a sell off is likely.
If we trade 14.80- that will be one thing.
If we close on top of 14.80 twice, then I think it is
a straight shot to 16.36 basis SX.
When do we get there?
Maybe March 3rd maybe
April 4th.
I think there will be many 50 cent and 1 dollar moves
up and down between now and mid June.
Keep the Dramamine handy, the soybean market
will likely do a few barrel rolls and maybe even
a few power on stalls. Let us hope that does not
put us into a death spiral whereas it is difficult to
pull out of.
The next 120 days will likely be something to
tell the grand kids about.
If you missed out on 2008 and 2012, the next
crazy train is about to leave.
All aboard !!!!
Please bring your roasted soybeans with you ;>)
Kory
