Bulls Favoring Soybeans as South American Weather Woes Continue
Today’s Spotlight Market
The annual USDA outlook forum held last week produced some bearish views for both Corn and Soybean prices this season. For Soybeans, the USDA lowered its average price for cash Soybeans to $9.65, vs. $12.70 last season, as the projection for U.S. Soybean ending stocks nearly doubled to 285 million bushels in 2014. All this is predicated on higher U.S. production as well as increased Soybean export competition from South America. However, if South American Soybean production estimates continue to be lowered, we may see the U.S. capture additional Soybean export business which could help to put a dent in the expected increase in Soybean carryover come fall.
Fundamentals
Commodity bulls are back in the Soybean camp after less than ideal weather in Brazil during the growing season has analysts lowering their estimates for the nation?s crop. This season?s South American Soybean crop began on a rough note, as hot and dry weather in both Brazil and Argentina plagued the Soybean crop during early development. However, the opposite problem has recently emerged, where heavy rainfall, especially in Brazil, has caused harvest delays. In addition, wet weather has increased the formation of fungal disease, which could further depress yields. Some analysts are starting to lower their estimates for the Brazilian Soybean crop due to weather issues.
Current tight global supplies combined with potentially lower South American production have sent old-crop Soybean futures to 5-month highs, with the front-month March contract nearing the $14 per bushel level. New-crop November Soybeans have seen a more muted price rise, as traders are starting to factor in the potential for higher U.S. Soybean planted acreage this season, mainly at the expense of Corn given current new-crop futures price levels.
Spread traders have noted that the old crop/new-crop Soybean spreads have widened considerably, with the May14/Nov14 spread gaining over $1 per bushel since the start of 2014. We should get a better feel for the potential size of U.S. Soybean plantings in the coming weeks when the USDA releases the data from its Prospective Plantings survey on March 31st. ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for May Soybeans, we notice prices spiked higher on Thursday, trading just over 1445.00 before aggressive selling entered the market and propelled prices lower to end the session. This negative technical price action could be the start of a much needed price correction, as the bull market may need to catch its breath after a nearly $2 price rise in February.?? Prices are now well above both the 20- and 200-day moving averages, and the 14-day RSI has moved well into overbought territory, with a current reading of 79.06.? Thursday?s high of 1445.50 is now seen as resistance for the May futures, with support seen near 1325.00.?
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