By James Cordier & Michael Gross
www.optionetics.com

Mid-October finds the US soybean harvest in its homestretch and as such, on hand supplies near what will probably be their highest levels of the year. It is not uncommon for soybean prices to make a seasonal low this time of year to reflect higher on hand supplies.

On the other hand, it is also not uncommon for prices to begin drifting higher after harvest as wholesalers begin to gobble up newly acquired inventories. In fact, a late cold snap in US growing regions has threatened the tail end of harvest, giving soybean prices a jump start on what is commonly attributed to "seasonal" strength.

Speculative weather rallies, however, have their limits.

Record production in the US and a projected record crop out of Brazil in 2010 should provide a considerable headwind to additional upside price action. The USDA's supply/demand report on October 9 showed 2009 US production topped 3.25 billion bushels while yields neared a new record at 42.4 bushels per acre. A day earlier, Brazil's CONAB estimated that nations upcoming crop would yield over 62 million tones of soybeans in 2010 - also a new all-time record for production.

Meanwhile, global ending stocks and stocks to usage, while not at records, remain hefty for 2009.