Soybean fundamentals to remain bearish
Allendale's custom, key short term soybean futures prices moving averages (MA) are 6080-6080 and 6080. A breach of these MA's are potentially the trigger to push July beans back to 5960. July futures remain in a wedge formation and long term resistance is 6190 and the wedges up trending trend line support is 5960. Look for funds to work within the wedge as fundamentals remain mostly bearish as result of bird flu, big S American crop and poor USA exports of beans and soyoil. Hone in on the July beans wedge resistance and support levels for trading and pricing opportunities.
Soybean Oil Fundamentals: Interesting is how funds may have taken a hold of soybean oil as the bio diesel futures contract similar to what they have done as recently as last June-July. Funds do not have a bio diesel futures contract as ethanol is to the corn market. If the funds were to look at the fundamental data for soybean oil exports, they would see immediately how usage is extremely bearish. As these soyoil and soybean futures are driven higher technically, it is to be expected those same technicals which may dictate when funds pull the plug and then point to bearish fundamentals, given a average weather year for the USA.
CFTC/Price Report: Our custom CFTC/Price ratios also suggest funds may not be willing to establish a heavy position short or long at this stage of the S American harvest and bird flu unfolding day by day across greater Europe.
Soybean Fundamentals: in a word fundamentals are bearish. Yes the trade is very much focused on S America soybean growing season and harvest especially for Brazil which is underway. Too much rain is interpreted as not a major problem for the early harvest in the key central west region. The outlook suggest harvest activity is expected to catch a break by the middle of next week. At this point quality is not a issue. Argentina continues to receive timely rains for soybean production and we do not anticipate USDA to make any major radical downward production changes for either country. Bird flu continues to sicken soybean and soymeal futures. On a bullish note is how the national Asian Soybean Rust Center posted a lengthy list of southeast states with rust very early this new year.
Exports: another week of sub par export sales were released. With half of the marketing year remaining, unless S America has a monumental change in weather which would disrupt the typical flow of soybeans to export facilities, we anticipate weekly sales to trail off noticeable by the middle of this month. Gulf basis has been peeling off its first half month of March basis premium and interior basis is expected to follow the Gulf lead. Crush margins remain supportive to soybean futures as they work within values which promote full capacity utilization. Do remember it is typically the summer months when plant shut downs begin for maintenance schedules. Sales thus far this year are 22% behind last years pace. Sales of soybeans thus far this year as a percent of the 910 mil bu export target USDA is using are 79% sold vs a five year ave of 85% with S America to take the lead of new supplier by the middle to end of this month.