Soybean Prices Under Pressure As South American Harvest Looms
Today’s Spotlight Market
March is the official start to the planting season in North America, as analysts sharpen their pencils to anticipate how much acreage will be planted to the major cash crops such as Corn, Soybeans and Spring Wheat. The biggest report that awaits grain market participants is the prospective planting report scheduled to be released on March 31. This report is rather notorious for producing large price swings in Corn and Soybeans, as this is the first ?official? estimate for the potential size for this season?s production. Prior to this report, we have the USDA Agricultural Outlook forum scheduled for this Thursday and Friday. Traders tend to key in on the USDA outlook for Grains and Oilseeds at the forum for estimates on how the USDA is sizing up this season?s crop year. March 9 will see the release of the March crop production and supply/demand report, and also the release of the USDA season-average price forecasts. For longer-term forecasts, the USDA will release its agricultural projections through the year 2025 on March 18.?? ?
Fundamentals
It?s harvest time for Soybeans in Brazil and Argentina, which should spur renewed interest in Soybean futures among speculators and commercial participants in the coming weeks. Soybean prices have been generally range bound since the start of the year, as weather conditions have generally cooperated with producers in the Soybean growing regions in South America. Now that the bean harvest has begun in Brazil and is about to start in Argentina, analysts and traders are preparing their estimates for the eventual size of this season?s crop. The important Brazilian Soybean producing state of Mato Grosso is expecting a record crop this season and is seeing harvest running ahead of last season?s pace at just under 40% completed. Private forecasters expect Mato Grosso?s Soybean production to exceed 28.5 million metric tons, which is over 1 million metric tons above the estimate from Conab?the Brazilian state crop bureau. While it appears that South American Soybeans will continue to be a formidable competitor for U.S. producers in the export market in 2016, many traders will continue to look at infrastructure challenges of getting Brazilian Soybeans to ports for shipment, which could cause the U.S. to capture additional export business. However, current exchange rates for the Brazilian Real vs. the U.S. Dollar should encourage Brazilian Soybean producers to move crops for exports. With global Soybeans appearing more than ample currently, importing nations may hold off on purchases initially in the hopes of obtaining Soybeans at lower prices should ?harvest pressure? selling weigh on futures prices.??????????? ?
Technical Notes? – View Today’s Chart
Looking at the daily chart for May Soybeans, we notice prices moving in an ever tightening range since basically October of last year, as the U.S. harvest was completed and South America experienced a rather benign growing season as far as weather scares were concerned. We are starting to see prices weaken on and falling below the 20-day moving average, which is encouraging short-term momentum traders to favor the bearish side of the market. The 14-day RSI is still holding near neutral territory, with a current reading of 47.72. While we do note that trading volume has been steadily rising, much of the increase is due to rolling of March positions into the May futures ahead of First Notice Day on February 29. Support for the May contract is seen at the February 9 low of 863.50, with resistance seen at the February 2 high of 890.50.????
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