New-crop soybean complex bullishness can’t be ignored, analyst says

Less U.S. acreage has eyes on Sept., Nov., soybean futures contracts.

New-crop meal looks cheap given supply/demand new-crop outlook. 

While there are plenty of short-term negative factors for the soybean and meal markets, we see the longer-term new-crop setup as too bullish to ignore, and we look for a resumption of the uptrend soon.

If the U.S. soybean planted area is as small as the USDA has forecast, it will take record-high yields to avoid an extremely tight scenario for the new crop season. For the April USDA supply/demand report this Friday, the average prereport estimate for 2020/21 U.S. soybean ending stocks is 118 million bushels, with a range of 105 to 135 million. This would be down from 120 million in the March report.

World soybean meal ending stocks are expected to come in around 83.3 million tonnes (79.7- to 85.0-million range), down from 83.7 million in March.

Traders are looking for Argentina soybean production to come in around 46.7 million tonnes, down from 47.5 million in March. The 2020/21 Brazilian soybean production is expected to be around 134.2 million tonnes, up from 134 million in the March report. 

The market continues to consolidate some of the March 31 gains. The possibility of extremely tight ending stocks if the USDA acreage report is correct has provided underlying support. The focus ahead of last week’s USDA reports was on old-crop supplies, but with first quarter stocks higher than expected and less acreage forecast for 2021, the focus has shifted to new crop.

Argentina’s crushing industry continues to run at a near-record pace, and crushers are going to start seeing new-crop beans rolling in soon. Brazil crushers are also rolling along trying to capture the high premiums in soybean oil. 

Market Ideas

Close in buying support for November soybeans comes in at $12.68 and $12.46, with $12.96 and $13.23 the as next upside targets. July soybean support is at $14.01 and $13.89, with $14.78 as the next upside target. December meal support is at $389.30, with $411.20 and $421.60 as the next upside targets. 

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For daily updates on cattle, hogs, corn, wheat, and the soy complex, visit hightowerreport.com.

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