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Robust Demand, Dry Weather Spur Soybean Price Rally
USAgNet - 07/14/2017

Soaring soybean exports contributed to a recent price rally, according to today's U.S. Department of Agriculture World Agricultural Supply and Demand Estimates Report and industry analysts.

Even though market history indicates the soybean price surge may end soon, Iowa Soybean Association (ISA) leaders are hopeful a major purchase of U.S. soybeans by Chinese buyers in Des Moines Thursday and a historic trade mission to the country July 19-28 to boost demand for Iowa-grown grains, meat, milk and eggs may bolster soybean prices.

The government projects a record 2.1 billion bushels of soybeans will be exported this year, up 50 million bushels from last month, reflecting shipments and outstanding sales through early July. Strong demand and dry field conditions caused August soybeans to hit a four-month high on the Chicago Board of Trade this week at nearly $10.30 per bushel, a $1.20 per bushel jump since June 23.

ISA Market Development Director Grant Kimberley said there's still upside potential in the market, especially if the weather remains hot and dry.

"Export numbers have been underestimated so far, and I'm glad to see the positive upswing in projections for the current marketing year," Kimberley said. "The global demand is there, as illustrated by a Chinese delegation of buyers who will sign soybean contracts Thursday. While exact volumes are unknown until the signing event, the contracts are rumored to be some of the largest commitments to date; a testament to our hard work to improve demand fundamentals and trade relations with China."

Al Kluis, grain analyst and broker, said the price rally may be coming to an end despite continued strong demand overseas for U.S. beans at a time they tend to lag. He said summer price rallies typically last three to four weeks.

"We're approaching week three. I think it will take a significant, prolonged weather scare to sustain the rally," he said.

Based on current crop conditions and a somewhat favorable report for soybeans, ISA Board member Lindsay Greiner of Keota thinks a new bottom may be set in the market.

The report projects U.S. soybean production at 4.26 billion bushels, up 100,000 bushels from last month. The nationwide yield forecast remained the same at 48 bushels per acre.

Soybean ending stocks for 2016/17 are forecasted at 410 million bushels, 40 million less from last month but still more than double 2015/16 levels. The USDA also reduced the following year's ending stocks by 35 million bushels to 465 million.

"I don't think this crop will get any bigger so there could be some opportunities," said Greiner, who took advantage of the most recent rally selling the rest of his 2016 soybean crop and a portion of the one in fields. He's waiting to see if hot and dry conditions persist in the Midwest and demand increases to push prices higher before making more sales.

"Soybeans are entering a critical period where they're blooming and setting pods soon," he added. "As dry as it's been, our soybeans look good but I don't have to drive far to find poor fields. I don't think Iowa will raise the same crop as last year, but we'll know in eight weeks."

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