Chinese Demand Key for Soybean Prices in 2013
?? Fundamentals
Soybean futures prices are well off record highs seen last summer, as the sizzling U.S. export demand from China is expected to abate. China imported record amounts of Soybeans in 2012, as strong demand for both Soymeal and Soyoil boosted profit margins for the country’s domestic crushers.
However, cash market participants have started to see some cancellations of Soybean purchases by Chinese importers, as buyers are now awaiting “cheaper” beans from South America to hit the market now that the southern hemisphere harvest has begun.
This trend is expected to slow U.S. Soybean exports for the foreseeable future, which has produced a negative effect on prices. Traders also anticipate the USDA will raise 2012 U.S. Soybean production totals to nearly 3 billion bushels later today, which is nearly 30 million bushels higher than estimated in December.
Lower potential export totals and higher production will more than offset higher crush demand, as traders expect the USDA to raise 2012-13 Soybean carry-out by 5 million bushels to 135 million bushels. So unless we start to see some significant harvest delays from South America, rallies in Soybean futures may struggle until China and other Soybean importers are forced back to the U.S. for their Soybean purchases.
?? Technical Notes
Looking at the daily chart for March Soybeans, we notice price action has turned choppy ahead of the January USDA crop reports. Prices are currently below both the 20 and 200-day moving averages (“MA”), and the 20-day MA has recently crossed below the 200-day MA, which is considered a bearish signal by some chart technicians.
The 14-day RSI has bounced off oversold levels, with a current reading of 40.13. There is currently a double-bottom at 1356.00 that is acting as strong support for March Soybeans, though should this level be taken out, we do not see any chart support until the 1280.00 price level. Resistance is seen at the 200-day MA, currently near the 1445.00 price level.
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