Grain Spreads: Bean Counting
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Commentary
Beans ended higher today following through to the upside after bullish USDA numbers yesterday. November beans moved slightly above the late early July gap on the charts for a brief moment today.. Yesterday's report day trading volume was extremely high giving some credence to the upside breakout in my opinion. The Trade is still trying to adjust to different potentials on the balance sheet as harvested acres miss by 2.4 million acres per USDA. In my opinion the game has changed regarding the supply side of the balance sheet. In my view yield needs to remain at or above 53.6 bushels per acre to maintain the carryout. Crush and exports must remain unchanged to avoid edging the US into rationing. The good to excellent ratings will be watched closely in every release, as will every forecast rain. The Trade is very aware that since 2017, only twice did the USDA’s yield not fall from August to Jan. Several instances have been in excess of 2 bushels per acre less which in this year could put the carryout near a rationing state. There has been a lot of noise about China not buying any new crop beans. Last year though was the same worry and by mid-August the same worries were evident. By late Fall/early their buying pace picked up and slightly exceeded USDA expectations. I’m not saying it’s not a worry, but it’s also early. Chinese state buyers buy US origin for storage into reserves as US origin keep better than South American as those beans go to hand to mouth as needed. At the end of the day we are still supply side driven here as there is plenty of time for weather to create issues for what is in the ground.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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