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Fundamentals show that the soybean market is overbought, analyst says

For soybeans, if there is a correction, a setback to $14.29 cannot be ruled out, analyst says.

When considering the near-term fundamentals, the soybean market remains overbought, and a turn down in vegetable oil prices might spark a significant correction.

July soybeans have consolidated below the April 27 contract high and key reversal day.

The rally in the grain and soy markets has been led by continued dryness for the second corn crop in Brazil, which is causing significant stress. A lot of key growing areas do not have rain in the 7-day forecast, and this continues to drive the corn market higher.

Global vegetable oil prices have stayed very strong as well. U.S. weather is improving, and East Coast importers are likely to bring soybeans and soybean oil in from Brazil and Argentina. Palm oil production is already on the rise, and other oilseed acreage is expected to increase sharply in response to the rally in oil prices. Indonesian palm oil production for 2021 expected to reach 55.69 million tonnes, up 7.1% from last year. 

Open interest is down sharply from the April 19 peak. November soybeans closed sharply higher on the session yesterday, and the close above $13.57 was a positive technical development. 

July soybean oil closed higher yesterday and posted a new contract high, and July soymeal managed to bounce after Monday's very weak action. Talk that wheat feeding in China is lowering the meal usage has helped pull the meal lower over the past few weeks. July soymeal posted a contract high on January 13 and is still trading below the 50% mark of the January 13-March 12 trading range. The market seems to have corrected its overbought condition with the sideways trade. 

U.S. soybean exports for the month of March reached 2.295 million tonnes, down 10.7% from last year. There were no deliveries for meal this morning, and that leaves month to date deliveries at 27 contracts. There were 205 contracts delivered against soybean oil, which pushes month to date to 1,334. There were 31 soybean contracts delivered, pushing month to date to 227 contracts. 

Market Ideas

Selling resistance for July soybeans is at $15.49. If there is a correction, we cannot rule out a setback to $14.29. The close above $13.57 for November soybeans is a positive technical development. Support is at $13.48 1/4, with $14.12 1/2 as next target if the highs are penetrated. July Meal resistance comes in at 426.90 and 434.30. It will take a close above resistance to turn the charts bullish. Close-in support is at 410.20, with key support back at 393.40. 

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