Brian Grossman (312) ZANER Ag. Pop and Fade Soybean Rumors

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1 Brian Grossman (312) Ag Pop and Fade Soybean Rumors It has been a rather slow cycle of news this winter which has left soybeans mostly trapped in two headlines. Brazilian drought and China trade deal. Both of which seem to swing back and forth between bullish and bearish. For a period of time, the market was keenly focused on the fact that Brazil was hot, dry, and losing production. Match that story headline with the potential of a trade deal and large purchases from China; suddenly soybeans are rallying and looking to go to 10. Then, the news cycle turns. In recent weeks, several major firms have begun to revise Brazilian production higher after some estimates dropped as low at 112 MMT. With harvest now over half complete, it is appearing that the drought damage was not as severe as many had thought. With this number beginning to climb again, naturally, we would expect their export outlook to firm or remain steady at the very least and not helpful for US demand as global demand wains in the face of ASF and the Trade War. The market got a fresh taste of this through the later half of February; closing down 19 0 cents on the May contract. Once March got started, it initially didn t look much better. However, Friday ultimately offered a friendly surprise to finish the week. After selling off to a fresh calendar year low, a headline was floating around that interested the market. Reported that the US and China have a set outline on a trade agreement and may even be ready to sign this month was the most positive headline we have seen as of yet. Monday rolls around, the market had time to think on it, and yet here we are; still excited about last week s headline and the rally is on just from a lower price. But the real question is, can the market remain excited? With the start of March, soybeans entered the 3 rd quarter of their marketing year (Sept-Aug) and with the start of each new quarter is the USDA s Quarterly Grain Stocks report and the main reason I boycott the first WASDE report of each new marketing quarter as the data points will soon change at the end of the month.

2 Brian Grossman (312) Ag The as of Dec-01 Quarterly Stocks report showed soybeans On Farm at a massive billion-bushel record. What will the as of March-01 Stocks report show? The On Farm vs Off Farm are the hardest aspect of the stocks report to try and estimate. Often, we see producers quickly move their soybeans off the farm, but this year s trade dynamics changed that pattern. Ag Hedge Newsletter Get Daily Fundamental and Technical Updates for Free. Sent by Each Morning! Sign Up! Low farm prices and financial relief to offset the low prices from the Trade War has greatly slowed down the flow of soybeans. However, one aspect that has been red hot all year is domestic Crush. NOPA members have been reporting record breaking crush numbers for months now and I see no reason for the February (not yet released) to be any different. However, this likely hasn t been able to pull soybeans out of the bins any faster then previous years. Worse yet, was Crush able to offset loss in exports? My estimate at this time is no, gains in crush will not be enough to offset losses in exports. While there is still some missing data such as the last week of March exports and any official February crush (NOPA on March- 15) once released could change this number, but as it stands today. The US is likely looking at the smallest quarter 2 draw in several years followed the lowest quarter 1 draw in several years. This includes roughly 1.7 MMT of soybeans to China which, if things go as they sound, should increase substantially in the coming weeks and shown in Quarter 3 stocks. After additional Chinese purchases, the US may pick up additional sales from non-china buyers, but there is rapidly growing concern that the rest of the world, which bought early, may not need additional supplies until much later. This, too, could be partly to blame to ASF. Not only will China not require as much feed, but the fact that ASF has now spread beyond China is not only concerning the general public, but also reducing overall demand as animals are culled or processed early.

3 Brian Grossman (312) Ag Plus, the risk that it eventually spreads to the US. Then, any hopeful estimates on domestic crush could quickly be dashed. Yet the real question remains, is any of this enough to justify the current prices or has this been one long buy the rumor, sell the fact? Notice, large purchases are often met with selling pressure. And now that we are supposedly within weeks of a signed trade deal, the market(s) are under selling pressure. As of recent, any pop in soybeans has been a sell. Even today s action, we saw the session highs early in the session. Ag Hedge Calendar (US Only) A Handy Reference and Calendar of Important USDA Reports & Market Events. Sign Up to Receive One! This has been on my mind for several weeks now and it starts with the original question, how can the market be at this level with the current estimated 910 million bushel ending stock? At first, I thought the yield was much lower (maybe still is) but the USDA says otherwise. And yet we have soybeans over 9 dollars. The fear of Brazilian production is definitely playing a role, but what does that say for us once we get going on planting with clear weather? If there is one thing about history, it is it will often repeat itself. What we know about the history of soybean prices is that the higher the supply, the lower the price. As the estimates stand today, the US and the World is estimated to have a record high stocks-to-use ratio (stocks/demand). Planting season is just around the corner now and the stresses on this market are severe with the as of today demand outlook. With that in mind, I strongly encourage every producer to have a written down marketing plan. A proactive approach to market, just like equipment maintenance, is better proactively then reactively and worse yet, the time you might have to react is when you don t have the time. If you are interested in working with somebody to help guide you through a marketing plan as well as how to properly execute that plan with the available marketing tools, give me a call!

4 Brian Grossman (312) Ag Interested in my work at Ag? I am accepting new clients and would enjoy a conversation about my marketing services. Reach out to me directly at (312) Often, producers lack the time or understanding to properly plan and execute a marketing plan. My job is to wear that hat for you, so you can focus on the task at hand. But this is not to leave you left hanging. Ag takes pride in being a teaching firm as we want ALL of Or, our clients to feel comfortable with and understand the reason behind each trade. Ready to manage risk with Ag? Follow the link to get started! Contact me directly for a consult or even just a general chat about the markets and where I think they may be heading. Find me on Facebook and Twitter under the Thanks! Brian

5 Brian Grossman (312) Ag Financial Services Brian Grossman Market Strategist -- Agricultural Hedging (312) Direct Line (312) Fax Risk Disclaimer Trading Commodity Futures and Options Involves Substantial Risk of Loss and May Not Be Suitable for All Investors. You Should Carefully Consider Whether Trading Is Suitable for You in Light of Your Circumstances, Knowledge and Financial Resources. Abbreviations & Conversions: MT = Metric Ton TMT = Thousand Metric Ton MMT = Million Metric Ton 1 MT of Wheat/Soybean = bushels 1 MT of Corn = bushels Jan F Feb G Mar H April J May K June M July N Aug Q Sept U Oct V Nov X Dec Z Financial Services covers a broad range of commodities with individual divisions such as Ag Hedge, Precious Metals, and technical speculative based brokers. To learn more, sign up and contact us!