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Soybean price pressure ahead, analysts say

Aside from Minnesota, most of the major soybean-producing states have received various amounts of rainfall this week, aiding the crop's flowering growth stage. This is applying pressure to the Chicago Board of Trade futures prices, possibly setting a top for the summer market, analysts said.

On Thursday, the combination of beneficial overnight rains across the
Midwest and the trimming of speculative length served as catalysts for the declines, analysts said.

With August considered the most important month for soybean development, weather remains the main fundamental, analysts said.

Joe Victor, Allendale Inc., said that entering August, most of the crop is in favorable condition.

"Given the crop conditions right now, and they are subjective but it's the only thing we have to go on, we're in pretty good shape. So, it's all about the weather for the next three weeks."

Anne Frick, Prudential Bache Commodities LLC, said the remaining concern is in the northwestern Corn Belt, especially Minnesota. Also, there is no relief in sight.

More germaine to the relation of price direction is the fact that it's tough to rally soybeans after the corn pollination is over, Frick said.

"Because soybean prices rallied in July, it's tough to get a rally in August unless the weather is dramatically bad," Frick said.

Though the flowering stage is an important time for growth development, soybean podding does not take place till early August and that will be a critical time for that crop.

The market psychology knows this and leaves some room for price support, Frick said.

"I think a summer high has been put into place," Frick said. "But, because the balance sheet is still bullish and we are very vulnerable if we don't have good yields this year, that keeps prices well supported."

This could be a year that a bullish new-crop outlook forces an early harvest low in late July-early August. "As a result, a counter-seasonal pattern could trend prices higher through harvest," Frick said.

COMMODITY FUNDS HOLD LONG

Despite a sharp drop in prices this week, commodity funds still hold record-long positions in the soybean market.

"I'm surprised," Frick said. "You would think there would be more bailing out. Keep in mind though, the price declines didn't violate the upward trend lines on the daily charts. And we held some important moving average support levels."

ARGENTINA RECORD HARVEST

On Wednesday, its government reported that Argentina, the number 3 world producer and exporter of soybeans, took in a record harvest of 47.6 million tons during the 2006-2007 season.

Initially seen as negative to the market, the fact that Argentina's soybean crush is being constrained by power shortages, the trade sees the crop size having a delayed impact. "The power outage problems are affecting Argentina's ability to export this big crop," Frick said. However, this just leaves more supply to hit the world market when the U.S. new crop comes on the export scene later this year."

MARKET PLAY

Producers need to keep in mind that soon the soybean market will be carrying over 590 million bushels into the next marketing year, analysts said. And South America's 2007-2008 crop is expected to increase, with over $9.00 CBOT prices.

With these domestic and worldwide fundamentals, trying to figure out the market play with soybeans is becoming difficult, Victor said.

"If the market is not offering them carry, at least $0.06 per bushel per month, I would not recommend any selling," Victor said.

Victor added, "The focus right now should be on moving old-crop, not mixing sales of old-crop and new-crop production.

If the CBOT September 2007 futures contract hits $8.79 per bushel, producers should consider pulling the trigger on cash sales, Victor said.
On Thursday, that same contract closed at $8.64 3/4.

Sue Martin, Ag & Investment Services, said at a price of $8.50, producers should consider selling cash soybeans and then buy them back on the 'board'.

"If anything goes wrong with this crop in August, the market could go goofy," Martin said.

Aside from Minnesota, most of the major soybean-producing states have received various amounts of rainfall this week, aiding the crop's flowering growth stage. This is applying pressure to the Chicago Board of Trade futures prices, possibly setting a top for the summer market, analysts said.

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