Outside markets dominate soybean prices
CHICAGO, Illinois--With little change seen in next week's USDA Crop Production Report, the change in the U.S. dollarâ€™s value and crude oil prices remain leading fundamentals for the soybean market, analysts say.
USDA is expected to release its monthly Supply/Demand report along with new crop production data on Friday at 7:30 a.m. CST.
This week, a private marketing firm, Informa Economics, released its production estimates ahead of USDAâ€™s report. Informa pegged the 2007 U.S. soybean production at 2.628 billion bushels, lower than the USDA's last estimate of 2.598 billion.
However, market analysts see the crop estimates carrying less weight for the current soybean market.
John Roach, Roach Ag, wrote in a daily newsletter that the crop estimates are being trumped by outside markets.
"The U.S. dollar and crude have an inverse relationship, and the CRB Index, a global benchmark for measuring commodity price movement, has moved right along with crude for the past several months," says Roach.
Anne Frick, Prudential Bache Commodities LLC, says the rally in petroleum oil is boosting soybean oil, which is raising soybean prices. "I really think the dollar and the petroleum oil are the key factors for the soybean market right now, and for next week," Frick says.
Frick adds, "Unless there is a big change in the USDA data from October, which most analysts don't believe there will be, you can play the dollar value and crude oil song again."
DOMESTIC DEMAND UNKNOWN
With soybean supplies already known to be lower this year compared to a year ago, usage remains the unknown, Frick says.
Right now, soybean exports are lower than expected, making analysts believe that if it wasn't for the outside markets, soybean prices would be falling instead of rallying.
"If we were trading off the soybean balance sheet here, we would be selling off- not rallying. I don't see why this changes any next week," Frick says.
Though higher prices are expected for the spring of 2008, Frick urges producers to take advantage of current pricing opportunities.
"I'm not sure, but it looks like producers are holding onto this year's crop," Frick says. I wouldn't pass up current price levels." Frick says you never know if the unexpected will happen. For example, China could change its import policies, or prices could be quietly pressuring domestic usage in the U.S.
VOLATILE MARKET AHEAD?
In a weekly Agriculture Online article, market analyst Roy Smith says this has been an interesting week in the soybean market.
"All criteria for a normal dead cat bounce have been met. The highest close this week was 99 cents over the harvest low on October 8. There was a big jump in basis in the middle of the week. This is a sign of improving demand," Smith says.
Smith adds, "I still have not heard an explanation for the huge trading range on Thursday's market. It is scary to see prices make such wide swings. It is typical to see four or five price peaks at this time of year. So far, there have been three. Selling on any peak in the next month is a logical strategy for beans that must be priced before spring."