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A flip-flopping soybean market

03/13/2014 @ 2:45pm

The soybean market has a different attitude this week based on reports that China has been canceling cargoes from Brazil. Apparently, China has reached its choking point, with large port stocks, poor crush margins, and its pork and poultry industries dealing with disease. In addition, China may have cancelled a U.S. cargo.

Nearby beans are down 60 cents from the highs on this news. Traders will check for any morning daily sales announcements to confirm the rumors and the size of any U.S. cancellations. 

The bearish attitude started Monday morning with the USDA’s updated supply/demand tables. The report did not contain much ammunition for the bulls, which also led to a little “buy the rumor, sell the fact" type trade. The move accelerated with the start of the Chinese rumors and a chart that looked more and more like a top as the day wore on. 

The news and the price move have not solved all of the issues regarding balancing bean supply and demand in the U.S. Much larger cancellations are required and/or no new sales can be made. Or crush needs to be reduced. Or beans need to be imported into the U.S., something that is becoming more doable based on much cheaper prices in South America. 

So the soybean market is a demand (or change in demand) story. How about a supply story? 

The U.S. is paying more attention to the first weather market/supply issue of the season, dry weather in the hard red winter wheat areas. Combine this with ideas of smaller soft red wheat acreage and the ongoing Ukrainian upheaval, wheat has had several large moves higher.  So far, it’s up 15 to 30 cents for the week, depending on the contract, and up basically $1.50 from the lows at the end of January. 

Corn futures have noticed the sharp moves in wheat and have moved in sympathy. Every so often, market participants express concern with the cold snowy winter leading to potential planting delays. But basically, the markets have been busy rearranging themselves. Wheat is the leader this week (so often, wheat has been the dog in the past year or so), corn is stuck in the middle, and soybeans are taking it on the chin. 

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The risk of loss in trading commodities can be substantial.  You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

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Lesson4Africa 03/14/2014 @ 8:16pm Africa's farmers should learn their lesson!

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