Morning Futures Roundup

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Soybeans Sidestep Commodity Sell-off

    Fundamentals
The sustainability of the rally in Soybean prices has been impressive, especially in light of the general weakness in commodity prices lately. Fundamentals clearly favor the bull camp, as a continued decline in estimates for South American Soybean production and strong export demand have caused old-crop/new-crop Soybean futures spreads to soar, with the July/November spread now running over a $1 premium to the July.

New-crop prices have lagged somewhat, as many traders believe that relatively high Soybean prices may entice producers to plant more acres to Soybeans than current USDA estimates. However, even if we get an additional 1, or even 2 million acres of Soybeans planted this year, weather conditions need to be near perfect to allow adequate supplies to meet what appears to be sharply growing demand this coming season and prevent Soybean ending stocks from becoming extremely tight. So far U.S. Soybean plantings are running ahead of schedule, with the USDA reporting that 6% of the Soybean crop has been planted, vs. the 10-year average of 2%.

Commodity funds are heavily net-long Soybeans, with the most recent Commitment of Traders report showing non-commercial traders holding a net-long position of 244,158 contracts as of April 17th. If the net-long positions in Soybean Oil and Soybean Meal are added in as well, the position totals nearly 400,000 contracts! This huge long position may scare some traders, as it appears that the market has become overbought; but if the bullish fundamentals remain, it may be difficult for any sizable correction to occur, especially if fresh buying emerges by those desiring to enter the Soybean market an any price dips.

   Technical Notes
Looking at the daily chart for November Soybeans, we notice the recent price correction that took the market from nearly 1400.00 to 1332.00 seems to have taken the formation of a "bull flag" pattern. This bullish pattern is even more likely given that prices failed to test the uptrend line drawn from the major low made back on December 14th of last year. The pattern appears to have been confirmed, since we have closed above the recent high of 1365.50. Longer-term, Bean bears may argue that a double-top formation may be in the works if prices do not surpass 1400.00 in the near future. The 14-day RSI has moved from overbought territory to a more neutral reading of 51.99. The next support point for November Soybeans is seen at the uptrend line, currently near the 1333.25 level, with resistance found at the April 13th high of 1382.00.

  
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