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Profit Watch Commentary – Nov. 22, 2013

The soybean market caught on fire today. January soybeans closed up 28 cents at $13.195, matching the previous high this month. New crop was up nearly 8 cents at $11.67. Unfortunately, corn and wheat failed to show up to the party. December corn settled slightly lower at $4.22. New crop corn was unchanged at $4.5775. December wheat closed slightly higher at $6.495. July wheat (vs Chicago) closed up 3 cents at $6.59.

Something really strange happened in the grain market this week – grain prices didn’t get beat up! Perhaps we have put in the seasonal low? Soybeans put in the best performance of the week with January futures gaining 39 cents. Wheat got in on the action, but with much smaller gains of a nickel. December corn futures were sharply unchanged.

Wall Street didn’t have a problem with gains this week, or for the past seven straight weeks if you care to count. Both the DJIA and S&P closed at record highs. The DJIA settled 55 points higher at 16,065. The S&P was up 9 at 1,805. 20,000 – here we come? Who would have ever thought that the Dow would be sitting at record highs with high unemployment, an out of control deficit and record entitlements? I guess when the government messes with the market (as in QE forever), all of the old rules and “logic” fall to the wayside.

Fresh news was noticeably absent this week. Next week will probably be worse with the holiday shortened week. We expect trading volume to be light, which could be a good thing (or not). We have our eye on additional soybean sales. But, we don’t have a specific target price for you tonight. At the very least, today’s rally is a great opportunity to catch-up on old crop soybeans.

Basis is starting to narrow as farmers remain tight holders of both corn and soybeans. The fact is that exporting companies HAVE to get their hands on beans to ship to China with their aggressive sales program. To date, we have already booked 90% of the USDA annual soybean export projections with 42 weeks left in the marketing year. The average for this time of year is 62 percent. Kicking butt, is putting it mildly.

The USDA announced an additional soybean sale this morning to China for 4.2 million bushels. The other day the market was nervous that China was nearly finished buying soybeans and may even cancel some cargos. Chatter today was the complete opposite! Now, the talk is that China will pay up for US beans to ensure timely delivery. Evidently there were 60 day loading delays in South America last year. China doesn’t want a repeat. Bottom line: China is going to do what is best for China and they aren’t going to advertise their plans. This is why the market is going to be on pins and needles the closer we get to the harvest in South America.

The corn market doesn’t rely on exports as much as the soybean market. It is important, but we have other uses for corn like feed and ethanol. Exports were pretty pathetic last year. We expected a better program this year, and so far we are not disappointed. To date, we have 69% of the USDA corn export projections on the books. The average for this time of the year is 49 percent. Our competition is the Black Sea and South America. They typically undercut us on price. We haven’t noticed the competition in the last few years due to the increase in ethanol production. However, with increasing acreage, bigger carryouts and the anti-ethanol sentiment, we need to beef up our export share.

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