For some time, I have indicated that there was important timing for soybeans (grains in general) around the June 5 and 6. The past two or three intervals were highs and it was thought this one could be a low. It's possible that the timing came early, but there also was some timing that was dated on the May 29 and 30. Now, that timing aligned with solar bursts and it is possible that the true timing was the later dates. Regardless, the fundamentals driving the soybean futures is concern about weather and the ability to plant the remaining 20 million or more acres.
Cool, cloudy and wet days have delayed the maturing of soft red wheat. The longer this takes, the less potential of double cropped soybeans being planted. Export sales as of last week were down a mere 1 percent from last year's pace. Now, one might think that this is negative, but I think USDA had targeted exports for soybeans this year to be down as much as 13 percent because of the sharp reduction in acres last year. The world is hungry and China was the largest destination for soybeans in the past two or three reports. I suspect that this will continue to be the case during June and July.
The ongoing farmer's strike in Argentina has caused concern for the world's importers. Congress needs to take a look at how the world's importers have been reducing import taxes in the face of all-time record high prices. I am told that the average import duty was near 44 percent. In the March 31 prospective planting report, and subsequent supply and demand reports has estimated the 2008 to '09 carry to be at 185 million bushels. That estimate was based on all acres being planted. A carry-out of 185 million bushels is not large. Now, with the weather intervening, that number may be smaller. I look for a summer that stokes the South American farmer into planting more acres. Recent estimates are that the Brazilian farmer's soybean input costs will jump by 40 percent this coming growing season. Rumor has it that China may mandate 5 percent biodiesel ny January 2009. If so, that would increase imports of vegoil by 20 percent or 30 percent.
Bottomline, I look for July soybeans to see new all-time highs again. Two U.S. senators plan to introduce a bill that would not allow the tariff on imported ethanol to exceed the subsidy paid to U.S. producers. The current tariff is 54 cents per gallon with the subsidy paid to producers 51 cents.
The current version of the farm bill reduces the subsidies to U.S. producers to 45 cents per gallon. With the strength in soybeans relating to weather, corn made new all time highs. I tend to think that the December corn futures may see a "7" in front of the price. Concerns amount in the price window of $7.23. These price levels are offering the farmer great profits. I tend to think the July contracts of corn or soybeans will not be the option month that puts the highs in this year. Thus far, for soybeans it is the May contract that has entered in the highs. For corn, thus far, it is the July contract, but, it is a lead month that counts, and I suspect July is not it.
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After the March 31 report, the trade thought corn acres would pick up 2 million to 3 million more acres. Now, the thinking has reverted back to acres maybe being less than the 86.7 million acres. Some estimates are as low as 84 million acres. On June 3's supply and demand report, USDA may lower the yield because of the late plantings and weather. The estimate of 153.9 bushels per acre nationally, seems high. Still, the carry-out looks to decline via yield drag and wheat will probably pick up good feed demand at harvest. A national yield of 151 to 149 could spell disaster with the carry dropping under 700 million bushels and we aren't even into pollination. Another concern is reports of female seed corn planted, but, the inability to get the male seed planted. I am hearing reports of this occurring in Iowa, Nebraska and Illinois.
