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Sharp drop in open interest for meal and oil; long liquidation

Like corn and other commodities, the soybean market remains under pressure from deteriorating demand views. Macroeconomic conditions are deteriorating with softer data and rising interest rates, which has deflated inflation interest in some commodities. However, the downside breakout yesterday in November soybeans was partially the result of ideas that the late corn plantings could cause growers to shift to planting more soybeans. One analyst predicted U.S. corn plantings to be the slowest in 25 years. As of Sunday, 8% of the U.S. soybean crop had been planted, up from 3% the previous week but below the five-year average at 13%. Another negative is the potential for further declines in soybean oil following news of a possible loosening of export restrictions in Southeast Asia. 

Markets saw a recovery bounce overnight with meal higher after break to the lowest level since February 1. Technical indicators are very oversold, so we cannot rule out a more significant bounce. With more heat and less moisture in the two-week forecast than has been seen recently, planting progress may improve. In addition, the trade may be underestimating the impact of lockdowns and a slowing economy of China. A significant drop in open interest for oil and especially meal is seen as a negative force and indicates a long liquidation selling trend.

Market Ideas

Close in resistance for July Soybeans comes in at 1665½ and 1678½, with support at 1629½. A close under support would leave 1539½ as initial key support. Key support for July Meal is at 422.50, and it will take a close below this level to see a test of next key support at 403.30. Resistance is at 439.40. July Soybean Oil is still operating under the negative technical influence of the key reversal from April 29. Resistance is at 83.45, with support at 77.58 and 75.21. 

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About the Author: Terry Roggensack, a founding principal of The Hightower Report, analyzes the livestock, grain and soft markets. Roggensack has over 30 years of experience in the commodity and financial futures industry. In the late 1980s, he briefly lived in London as acting director of a new London clearing firm. Prior to that, Roggensack was director of research at Stotler & Company.

Editor’s Note: This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited.

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