The Morning Vibe, Septic Peg Etc

05/11/12 -- In what the media are calling a race too close to call, Septic Peg, my spirit guide from beyond the grave, puts her runes on the chopping block again and is forecasting a new US President this week.

Whether she's right, and how the markets will react if she is, is unclear however. We've seen a pretty big sell-off in soybeans in particular this past couple of months on profit-taking, harvest pressure and risk-off in the run-up to this election.

Yet the fundamentals haven't changed a great deal. Record South American production is still expected in 2013, albeit maybe not quite as large as it may have been due to a combination of late planting, wetness in Argentina and dryness in Brazil.

The crops there however are still 4-6 months away from hitting the world market, which means there's still time for it all to go tits up, and in the meantime US soybeans have to feed the world.

Friday's USDA numbers show that US soybean export commitments are now at 75% of the USDA's full 2012/13 season projection. Last week's shipments of 1.7 MMT were the highest since Nov 2010 and the fifth week in a row that exports have topped 1 MMT. The US has now shipped 6 MMT of soybeans in the last four weeks.

It is noteworthy too that the current CBOT pricing structure on soybeans doesn't encourage US farmers to carry, wIth May 13 more than half a dollar cheaper than Nov 12, why would they?

It seems to me that soybean availability is shaping up to be exceptionally tight in Q1 of 2013. What the US hasn't shipped already by this time will almost certainly have been sold. Record production in South America, if they get it, will also bring with it another set of problems: logistics.

With that comes shipping delays (probably acute shipping delays), the inevitable dockers/truckers strikes, truck shortages, highway congestion, you name it. Argy truckers and farmers will be running out of tyres to burn on the roads leading to the ports. All that adds up to front-end tightness, with potentially some very large premiums being paid for readily available soybeans/soy products in Europe come the spring.

That's the way I see it anyway.