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Friendly news, unfriendly reaction

Agriculture.com Staff 02/16/2009 @ 6:58am

USDA's anticipated Supply and Demand report, in which estimates for the South American bean crop were to be released, had many believing that drought conditions in Argentina and Southern Brazil would indicate lower production estimates and in turn provide price support.

The report did confirm drought conditions have reduced crop potential. However, the market basically yawned and turned its attention back to the growing concerns of the economy.

World projected carryout for soybeans dropped from 53.94 million metric tonnes to 49.87, or a drop of 7.5%. The Argentine soybean crop dropped from 49.5 million metric tonnes in January to 43.8, while the Brazilian crop dropped from 59 million metric tonnes down to 57. While the reduction in numbers was expected, these numbers were more than expected. Opening calls of 10 to 20 higher apparently overestimated the market's reaction. In essence, the market believed the report was probably old news, and the failure to move higher sent a signal that prices could be in trouble. On Tuesday when the report was released, prices did manage to trade as high as $10.10 in March, but this failed in comparison to the previous day's high of $10.19. The market, as of this writing, has since slid 4 consecutive sessions, now trading near $9.60.

The combination of an increased chance for rainfall in the forecast by late Tuesday afternoon on February 10, report day, may have also capped rally potential. More importantly though, the market continues to see prices rally potential as limited. Typically, the bean market has the tendency to hold in February and then move higher in March and April. This week's price action questions whether this will be the case this year. Economic concerns that continue to engulf the U.S. and most world economies seem to be playing a bigger role for price direction than it has anytime in the last decade.

Almost anything can happen in a given marketing year. A scenario is beginning to develop, and that is more of a sideways to lower price pattern for beans. Since early January, the inability of the market to follow through on rallies is beginning to show a technical picture of a series of lower highs and lower lows. If planting gets off to a good start, a price slide is likely.

If you have questions or comments, contact Bryan Doherty at Top Farmer, 1-800-TOP-FARM ext. 129.

USDA's anticipated Supply and Demand report, in which estimates for the South American bean crop were to be released, had many believing that drought conditions in Argentina and Southern Brazil would indicate lower production estimates and in turn provide price support.

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