Linked In
News In
Linked In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Morning markets: specs' record net long weighs on soybeans

Twitter Linkedin eCard

Has soybeans' time of reckoning come?

While corn and, especially, wheat managed some recovery from the last session's drubbing, soybeans (which albeit fell less steeply last time) maintained a downward path.

The benchmark July contract fell a further 0.5% to $14.77 ¾ a bushel as of 09:00 UK time (03:00 Chicago time), not a good technical sign,

"The trade below the $14.82-a-bushel level, Monday's low, doesn't look good now," Brian Henry at Benson Quinn Commodities said.

Furthermore, Thursday's decline put the contract within two cents of its 10-day moving average, below which, a place it has rarely trod in 2012, could lie some automatic sell orders, fuelling further decline.

Many traders use moving averages as strategic points for placing buy or sell stops.

Record net long

Why technicals matter so much, even in the absence of negative news on soybeans' supply and demand fundamentals, is the record net long position that speculators hold in the oilseed.

And long positions represent unfulfilled selling, a factor Rabobank, among others, has warned about this week.

The bank warned of a "considerable risk" to an upgraded forecast for soybean prices posed by the "record level of bullish bets by speculators".

Mr Henry said: "Buyers have to be aware of the record large net long fund position."

The last session's "poor performance", in which funds sold an estimated 9,000 soybeans lots, "is going to result in the soybean market having to prove that it has value at or near these levels".

'Effect is waning'

Furthermore, the bullish impact of the stream of US soybean export sales announcements, the latest on Wednesday of 204,000 tonnes to "unknown", may be wearing off.

"The trade understands that the US is going to be able to book a considerable amount of new crop exports, so the effect of daily announcements of new crop soybean sales is waning," Mr Henry said.

New crop November soybeans weakened too, by 0.5% to $13.62 a bushel.

In today's weekly US export sales data, due later, it is the level of old crop sales which may prove the most influential in a total expected to come in at 1.0-1.5m tonnes, in line with the previous week's 1.41m tonnes.

Yield estimates

It was


which led in Chicago in early deals, recovering some ground from the last session, after the second day of the Kansas wheat tour showed crop still in good condition, but not quite so overwhelmingly so, with dryness and disease threats more common.

The second day of the tour came up with an average of 43.7 bushels per acre, well above last year's 33.4 bushels per acre for the day, and the best result for seven years.

But it was below the 53.6 bushels per acre from day one, and brought the average so far down to 48.5 bushels per acre.

July hard red winter wheat recovered 0.1% to $6.31 ¼ a bushel in Kansas City, where the tour ends up later today.

Chicago soft red winter wheat for July rebounded 0.5% to $6.17 ¼ a bushel.

Rule change

Still, were there some less obvious factors at work here too?

One conspiracy theory doing the rounds on Wednesday was that the sharp declines were encouraged by traders encouraging volatility and attempting to make the most of current commission rates before the risk of erosion when Ice begins its rival grain contracts in two weeks' time.

Meanwhile, Lynette Tan at Phillip Futures noted the potential negative impact of Dodd-Frank rules which will raise margins for crop speculators from May 7.

The news appeared to have prompted "locals who might be affected by the change to exit old crop/new crop spread positions", Ms Tan said.

The rules will abolish a concession which has allowed CME exchange members to take positions at the lower margin rates given to commercial hedgers.

Chart point

As for corn, it sided more with soybeans, with funds' determination to close down positions in the grain, ahead of a record crop expected this autumn, still appearing to hold sway.

The December contract dropped 0.2% to $5.30 a bushel, while the July lot fell 0.3% to $6.09 ¾ a bushel.

The drop took the July lot within sign of the next potential technical point, at $6.08 a bushel, key for followers of Fibonacci analysis, representing the 63% pullback from the recent high.

The trade is also digesting news that China has signed a long-awaited corn import deal with Argentina, although the drought-hit harvest this year, and bans on genetically modified trade, are holding up actual trade.

'Dryness needs to be monitored'

Among soft commodities,


for July dropped 0.3% to 89.22 cents a pound, amid a somewhat mixed picture on the external markets to which, as an industrial farm commodity, it is often more exposed.

Macroeconomic fears, evident in an erosion in crude prices, were also blamed, with weaker soybeans, for a 1.1% slide to 3,415 ringgit a tonne in Kuala Lumpur

palm oil


But back in New York, raw


at least managed to add 0.01 cents to reach 20.56 cents a pound, as Thailand flagged concerns over the lack of moisture in agricultural regions, adding to sugar sector dryness concerns stoked earlier in the week by the Indian state of Maharashtra.

"Thailand is the world's second largest sugar exporter. The dryness in both Thailand and India, the world's largest consumer, needs to be monitored closely over the coming months," Luke Mathews at Commonwealth Bank of Australia said.

India export delay?

Indeed, a source that India's dryness could put a spike on Indian plans to raise sugar exports, although has not yet been able to corroborate this assertion.

"Extra sugar export from India will not be announced any time soon," the source said.

"The food ministry want to see how the monsoon is this year. Any delay in told season arrival, will affect the crop."


Twitter Linkedin eCard
Related Stories

Evening markets: Soybean futures gain, cotton prices jump on US data

Initial USDA forecasts for crop supply and demand for 2018-19 lift soy and cotton prices, but are not so well received in the cotton market

Weekly grain market view from Europe, February 23

EU cold snap could damage crops... UK market prices in closure of Vivergo ethanol plant... Rising Russian wheat prices...

Evening markets: Argentine moisture slips up soymeal rally. But weather revives wheat

Meal futures dip, a little, for the first time in 12 sessions. But wheat futures gain, as drought spreads in Kansas, and cold reaches Europe

Morning markets: Ag futures ease, as traders await key 2018 forecasts

US officials will later on Thursday issue the first of a series of forecasts for US crops in 2018-19. Markets are cautious in the mean time
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069