I read this on the CME's website this morning:
Soybean prices moved higher today after trading higher overnight. The USDA's latest Supply and Demand Report was released this morning and it pegged US soybean ending stocks at 140 million bushels compared to 160 million bushels on last month's report. This was below trade expectations and the drop was caused by a 20 million bushel increase in US exports to 1.025 billion bushels. The stocks/usage ratio fell to just 4.6%. Since 1965, there has been only one other year (4.5% in 03/04) in which the stocks/usage level was lower. The old crop tightness only adds to the importance of receiving both a jump in planted area and a high yield for the coming season.
That sounds very bullish to me. If stockpiles of U.S. grain are at multi-decade lows (lowest since 1965), and current price levels depend upon both a "jump in planted area" and "a high yield for the coming season", what will happen to grain prices if the weather doesn't cooperate, planted area doesn't meet expectations, or for some other reason, yields are lower than expected? Last week, the CME also indicated that the percentage of U.S. grain up-coming (future) yield that had already been sold was about 95%, compared to the average of about 80%. That's grain that hasn't even been planted yet, and it is already 95% committed/sold. To me that is very bullish for the medium to long-term. And what would happen if there was a drought this summer in the mid-west? Or even a drought in Australia (as happened in 2006) or in one of the other major grain-producing nations, thus increasing demand for already tight global supplies?
