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The soybean rocket ship

02/27/2014 @ 3:38pm

The soybean market has been struggling recently because it desperately wants BAD news. What?  The rocket-ship rally in bean prices has been due to strong export sales that have built up over this past fall and winter.  In fact, there are so many sales on the books, the market is worried that there are too many bushels sold. 

To balance things out, the market has been looking for cancellations of sales, signaling a shift to Brazilian or Argentine beans.  Deferring sales to the new-crop fall slot is also a possibility.  With carryout projected at 150 million bushels, there is not much room to spare. 

What happened today?  This morning’s export sales report did have new sales, as well as cancellations of previous sales (to unknown). The market initially responded in a very positive manner to the report, with beans rallying as much as 40 cents.  Later in the day, however, due to aggressive farmer sales and speculative profit-taking, the soybean market got ugly and closed down 7-14 cents.  After the early morning rally, prices just ran out of steam.  Without an immediate snapback in prices, the chatter will be about a potential top.   

This is the time on the calendar when the February crop insurance prices are just about established.  With only one day to go, the corn price average is $4.61, and the soybean price average is $11.34. 

The market has been uncertain about 2014 corn and bean acreage for some time.  Attitudes have shifted from being bearish on new-crop beans (too many bean acres) to the thought that bean acres need to increase.  Between the recent rally in prices (80 cents) and the insurance guarantee, will farmers respond?  Next week, as the calendar switches to March, there may be private acreage surveys to guide traders. 

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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