“The market was expecting the U.S. to pick up that shortfall with this year’s crop. But then it looked as if we were going to reduce soybean acres in favor of corn, and very quickly we were able to trade $12 to $13 soybeans for fall delivery. After that came the weather concerns in the Midwest, and prices rallied sharply.

“Some analysts will say the soybean market has not yet done the job of rationing — we’re getting close, but we’re not there.”

This year’s world soybean forecast is for 236 million metric tons, Glidewell notes, and the 2012/13 forecast is for just over 267 million tons.

“That’s assuming South America will recover to a normal yield and will increase acreage to the maximum they practically can — most analysts would say a 5 percent acreage increase is about all they can manage.

“If this occurs, we could expect to see world soybean production up sharply, although in July the expected increase was reduced by about 1.5 percent, mostly due to worsening June-July conditions in the U.S.”

In the 2012/13 forecast for U.S. soybeans, he says, the projected yield in the last Supply and Demand report was 40.5 bushels per acre, which would result in 130 million bushels of ending stocks, for a very tight 4.2 stocks-to-use ratio.

“Many analysts are saying when we set the highs last week, $16.91 ½ for Nov. 2012 soybeans, most of the trade was trading based on what they thought was a 38-bushel national average. Soybeans were down 64 cents today (July 23), because the market’s perception of yield had changed based on a more favorable weather forecast in the Midwest, and it illustrates how sensitive the market is to weather forecasts.

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“But, if take that 130 million bushel carryover and reduce the national yield to 38 bushels per acre, you end up with a negative 74 million bushel carryover. If you drop the national average to 36 bushels per acre, you would have a negative carryover of 224 million bushels. We all know it’s impossible to have a negative carryover.”