Are soybean futures
poised for a plunge?
Mike Mawdsley, at broker Market 1, reminded of the trading adage,
in agricultural commodities at least, that "markets can take the stairway up,
and the elevator shaft down", thinking in particular of the oilseed.
(In fact, it could be applied to coffee and sugar markets
too, although the former especially seems to have found the elevator for its
upward move too.)
Another traders' adage to remember is that Tuesdays bring
turnarounds in Chicago.
Put them together, and will this prove the day that the
soybean rally goes into reverse?
'Buyers keep showing
Soybean futures were certainly lower in early deals in
Chicago, although not by enough to suggest that they had pressed any elevator
In part, reasons for bulls to take comfort are technical.
The March contract boosted its credentials in the last session
by filling in a gap on the continuous chart at $13.75 ½-13.85 a bushel dating
from September ("markets, like nature, abhor a vacuum," is another traders'
Also on the continuous chart, the lot closed above its 50%
retracement level from the July high.
And on its own, March chart it closed above its own
September high of $13.77 ¾ a bushel.
"Buyers keep showing up for soymeal and soybeans," Mr Mawdsley said.
"Any news is viewed as July friendly at the moment and
momentum is up."
And there is some news to be deemed friendly too, a major
one being the weather in South America, which is showing an un-Goldilocks
scenario in being too dry in the east of Brazil, too wet in the west and south,
and just right all too rarely.
Heavy rains have "added to the harvest delays being
experienced in South America", said Vanessa Tan at Phillip Futures.
"This is reminiscent of the harvest delays that we saw last
year. Delays could be worse than last year as South America is experiencing a
larger harvest this year that could overwhelm the improvements the region has
implemented on infrastructure."
Such delays switch importers' attention "from South American
soybeans to US soybeans, thus supporting US prices".
'Delays to field work'
As ever, the picture on harvest delays is not quite so
simple as, according to AgRural, Brazil's soybean harvest was 30% complete as
of Friday, 5 points ahead of the year before.
That said, the harvest in Mato Grosso, the top soybean
producing state included in the current wet zone, is some 4 points behind on
its harvest, at 45% completed.
And that delay could get larger, as "heavy thunderstorms
during the weekend for portions of Mato Grosso and Parana likely means local
flooding and delays to field work", said Anne Frick at Jefferies Bache.
"This may include harvest delays for soybeans and first crop
corn and delays to planting of second crop corn."
Crop losses too?
It is not just the delay to harvest, and of shipments to
ports, which is at issue, but potentially the crop itself too – depending on
who you listen to.
"Concerns about the crop size in South American and the
export pace from Brazil are the focus of market attention," Ms Frick said.
CHS Hedging said that the "yield loss" to the heavy rains is
"not a major concern, but soybean movement out of the country has been
But Doane said that "excessive rain in the midst of harvest
is threatening quality issues and harvest field losses.
"The weather situation in South America has continued
bullish, but now for opposite reasons. For months it was dryness threatening
However, one factor against soybeans on Tuesday was a
decline in values of soymeal, whose
strength - viewed as a result of the slim supplies issuing from Argentina, where
farmers are hoarding crops as a hedge against a falling peso – has been a big
Soymeal for May was 0.7% down at $445.50 a short ton as of
09:25 UK time (03:25 Chicago time).
Soybeans themselves are also, technically, "extremely
overbought", Kim Rugel at Benson Quinn Commodities said, adding that a late
retreat in the last session from highs had left a "slightly negative taste to
the settlements and a negative bias to short term technicals".
However, as to whether this had left soybeans open to a correction,
she noted that "producer selling was very light at best on Monday with interior
basis values steady-to-firmer.
"End-user pricing did not show any signs it was near its end
with Monday's volume modestly heavy. It will probably take till Friday when end
user should be out of market before any weakness can take hold."
Soybeans for March eased 0.5% to $13.79 ¾ a bushel, and for
May by 0.5% to $13.68 ¼ a bushel.
Grains were the slightly better performer this time, in
turnaround Tuesday fashion, with wheat gaining some support from the prospect
of further US cold weather, at a time when warmer temperatures last week have allowed
some melting of the snow blanket, although this has been replaced in many areas.
"With a third polar vortex settling in, winterkill concerns
are once again a topic of conversation," CHS Hedging said.
And fears over the condition of winter wheat seedlings were
given a boost when US Department of Agriculture staff in Texas revealed a
further decline in the health of the state's crop, rated a meagre 17% "good" or
"excellent", down one point week on week
"Weather concerns are providing some degree of support for
the wheat market," said Mark Welch at Texas A&M University.
That said, Chicago wheat for May was 0.1% lower at $6.16 ¼ a
bushel, although the Kansas City hard red winter wheat contract added 0.1% to $6.84
½ a bushel. Hard red winter wheat is under greater threat from the US cold.
Corn for May
eased 0.2% to $4.57 a bushel, amid contrary chatter.
CHS pointed out that "last week's USDA Outlook Conference
continues to negatively impact trade with extrapolations of mounting supplies"
of corn, with stocks expected to end 2014-15 at 2.1bn bushels, and many
analysts seeing that as an underestimate.
However, Doane flagged "continued strong demand for corn
from all sectors".
Friday's cattle on feed data, showing far more cattle taken
onto feedlots last month than had been thought, underlined that observation.
However, hog losses to porcine epidemic diahorrea virus
(PEDv) is putting a dampener on demand from that sector.
In New York, raw sugar and arabica coffee followed
soybeans on the downward path, but failed to show any signs of having found the
The May contract was 0.3% lower at 17.63 cents a pound.
New York arabica coffee for May fell 0.6% to 175.35 cents a
pound, but London robusta coffee was
doing better in adding 0.7% to $2,019 a tonne.
Some commentators have forecast a period of catch up by robusta
beans, whose discount to arabica values has soared.