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Turnaround complete in soybeans?
Last week we talked about some technical formations in grains that appeared to
be trying to turnaround the trends from down to up in grains. The corn daily
upside reversal stands out on charts, as does the Chicago wheat weekly upside
reversal. Soybeans had rallied against resistance, and now as of today are
rallying to new recent highs, pushing to 3 month highs as this is being written.
Most impressive about this recent rally is it is coming at a time when spring
planting progress is rapid, with corn planting at 19% complete Monday (vs. 9%
normal), and moving even more further ahead this week with a window of
opportunity early this week. The rapid planting progress applies to HRS wheat,
barley, and most other crops as well as we have one of the nicer springs in
recent memory. Typically, early planting leads to higher than trend yields,
with some of the best yields ever coming off early planted years.
There is also not a lot of outside market support leading to the higher grain
numbers, with crude oil, the dollar, and other outside markets not lending a lot
of support to grains. So this rally is coming mostly from the grains
themselves, with buying flooding in from funds who are anxious to get their
hands on some grain ownership in their portfolios. This seems to be most
prevalent in soybeans, where they have bought up against resistance marks the
next leg up from $9.50, or at about $9.75-$9.80 Nov. soybeans. We are currently
trading at the highest levels since January, with a strong uptrend rallying the
market from just above $9 on March 31 to where we are today ($9.85). To make
this kind of rally with little or no positive news out of South American or the
US is impressive to say the least.
Producers may have to look at this as a selling opportunity as some point, as we
could run above the critical $10 Nov. soybean area very quickly. Any sale above
$10 soybeans we consider a good sale at Pro AG!
On the other hand, maybe we can make a bull case for soybeans:
1. China's economy is at a strong point, gaining 12% GDP in the most recent
quarter, much more than most analysts had thought. That means its likely
that demand from China will be stronger in the near term, pushing above
projected export levels. Maybe China can gobble up a record South
American AND record North American soybean crop!
2. The ash cloud from the Icelandic volcano that spread across Europe could
have long lasting implications for crop production in Europe. We just
know too little about the impact of ash in the atmosphere and the
resulting crop production changes from weather impacts it might have in
the long term. Could it cause a European cold summer, or a drought?
3. Crude oil continues to trade at around $85/barrel, a recent high in crude
oil that continues to encourage use of alternatives like bean oil and corn
ethanol for fuel. Perhaps the biofuels boom is not yet over?
4. The US economy may be recovering more quickly than anticipated. So far
this first quarter seems to show a relatively strong showing that could
indicate in no uncertain terms the recession is over.
5. The early spring planting may pull soybean acres into corn, as early
planting typically means more corn acres, and less soybeans. Could we
lose 0.5 to 1 million acres or more soybeans to corn by June?
6. Very dry and warm weather pattern is in place for the past 6 weeks in the
US. If this weather pattern continues, it is likely to hurt soybean
yields more than corn yields. Especially if we experience a full fledged
drought by August of this year.
So whether the bull case for soybeans starts to generate some traction or not
might depend a lot upon the US growing season for corn and soybeans. So far,
planting looks great into what appears to be excellent soil moisture, so for now
the fundamentals are not supporting the stronger market rally we are
experiencing. Somethings gotta give, and we may find out what by the end of the
The information contained, while not guaranteed as to accuracy or
completeness, has been obtained from sources we believe to be
reliable. The opinions and recommendations contained are based on
our judgment and do not guarantee that profits will be achieved
or that losses will not be incurred. Recommendations should not
be construed as an offer to buy or sell commodities. There is
substantial risk of loss in trading futures and options on
If you have questions about this column, call Progressive Ag at 1-800-450-1404,
or email ray at email@example.com.
Last week we talked about some technical formations in grains that appeared to be trying to turnaround the trends from down to up in grains. The corn daily upside reversal stands out on charts, as does the Chicago wheat weekly upside reversal. Soybeans had rallied against resistance, and now as of today are rallying to new recent highs, pushing to 3 month highs as this is being written.