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Looking to the Futures

Volatility has Returned to the Soybean Market

Fundamentals:

Selling pressure finally emerged in the Soybean futures market following a contra- seasonal rally which saw prices rise nearly $4 per bushel since the start of November.

Much needed rainfall in some of the key Soybean growing areas in South America, appears to be the catalyst for some long liquidation selling that emerged last week.

In addition to the recent rains, current weather forecasts area calling for additional rains in Brazil and parts of Northern Argentina this coming week which could continue to pressure prices in the near-term.

However, the demand for Soybeans as well as its products such as Soybean Meal and Oil continue to remain strong, with US export inspections running well above last year’s totals and currently at 70.8% of the USDA’s forecast 2020-21 marketing year vs. just over 50% from the 5-year average.

Some traders may be starting to take profits ahead of the South American harvest which typically begins in February.

While many South American products have already forward sold the upcoming crop, additional supplies of Soybean’s from Brazil, will add competition to US producers who are currently the only significant source of Soybeans for export until the South American harvest begins.

In the January Supply/Demand report, the USDA estimated US 2020/21 Soybean stockpiles at 140 million bushels, down from 175 million in the December report. To put this figure in prospective, the USDA had US Soybean stockpiles for the 2019/20 season at 523 million bushels.

With the USDA also lowering its estimate for world Soybean stockpiles to 84.3 million metric tons from 85.6 million metric tons in December, we should expect to see global Soybean supplies remain tight even after the South American harvest and traders will be carefully watching new-crop Soybean futures prices to see if the market can “buy” enough acreage away from Corn or even Cotton in the 2021-22 season in the US to assure adequate Soybean supplies in the coming year to meet what appears to be a continuation of rising global demand.   

Technicals:

Looking at the daily chart for the new-crop November 2021 Soybean futures (SX21), we note the first meaningful price correction since September as prices ran into selling pressure as the market failed to hold above the 1200.00 price level.

As of this writing, we are seeing the market failing to hold the 20-day moving average (green) currently near the 1143.00 price level.

The recent price correction did succeed in moving the 14-day RSI out of extreme overbought territory with readings in the high 80’s to a much more neutral reading of 47.94.

Chart-wise, we see near term support at the January 4 lows at 1111.75, with more significant support found at the 1100.00 price level.

Upside resistance is seen at the contract highs of 1203.00 which occurred on January 15.

 

 

Contract Specs:

November 2021 Soybean Futures (SX21)

 

Trading Calendar:

Export Inspections: 11:00 a.m. ET

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