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South Central Iowa | Thanks, I'll throw it out there. Nothing is set in stone. These are just hypothetical and based on a myriad of things. Once real points become apparent, projection can improve. Like I mentioned, it relies on yield being reduced. I think it has been.
The USDA did us a favor. Strangely, if the September Wasde returns soybean yield to 48.0, it will actually be kind of bullish, lmao!
Fundamentals I am looking at to go along with are the Sept and Oct Wasde's and the Stocks report on Sept 29. I think we take two down steps on yield on both of those Wasdes. The kicker might be the grain stocks though. I read some analysis about that around the June report. It made convincing mention that our soybean stocks are declining even though usage had been at expectations. The takeaway argument was that our yield for 16/17 was too high. So I can envision a fundamental scenario playing out like this:
September Wasde lowers 16/17 carryout to 330 million based on exports surpassing their expectations once again. Then yield is lowered back to trend area of about 48.0. Because of a reduction of 40 million bushel to carry-in and 125 million off production, the carryout of 17/18 falls from the August projection of 475 mb to 310 mb. Then in the September stocks, it is acquiesced that we never had as many soybeans in the 16/17 crop as we thought and yield for that year would be implied to drop from 52.1 to 51.5 or some such number. Therefore, on the October Wasde we drop 16/17 carryout from 330 mb down to 280 mb because of the drop in production estimate for that crop. Simultaneously we drop yield estimates for 17/18 again, now to 46.7 (just using last years trend now for purpose of an example). That is a 115 mb drop in production for 17/18 along with the 50 mb drop in carry-in. This would low our projected carryout from 310 mb in the September Wasde to 155 mb in the October Wasde. The USDA will not drop it that low because they will cut usage. But by that point, the game will be up and we will already be off to the races.
Like in Minneapolis wheat this year, later yield cuts might not have the effect everyone wants them to. Beware a high in October/November if that scenario plays out. Everyone will want to hold his physical beans and may watch the rally pass him by. That's why I have such a steep line in that chart. That last green hypothetical bar is 11/29. This thing could play out really fast and violent.
Edited by Conan the Farmer 8/13/2017 16:17
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