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Soybean Rallies Are Selling Opportunities

The bean market rolled lower all week

Soybeans ended the week on a rather quiet note, as the market chopped sideways into the March options expiration.

For the day, the March traded a 7¢ range. For the week, we lost 19¢ while trading a 35¼¢ range.  

The USDA released its full balance sheet numbers this morning, and they were pretty much as expected. Acreage released yesterday was pegged at 88.0 million (+4.6 from last year). Harvest was estimated at 87.1, +4.4. They are projecting trend yield at 48.0, down from last year’s record 52.1-bushel-per-acre yield. This brings production to 4.180 billion, 127 million under last year.

When you include the beginning stocks increase (what is left over from the current year), total supply will increase by 97 million to a new record of 4.625. Higher supply will bring in a 75 million increase in demand (higher crush, exports, and other).

Ending stocks were left unchanged from this year at 420 million. Higher usage and the same stocks slightly lower the stocks to usage rate from 10.2% to 10.0%.

Today’s weekly USDA export sales data was viewed bearish. Coming in at 42,214 metric tonnes (413,507 old crop). This was under the 650,000 to 1,150,000 range the trade was expecting. We have now sold 93% of the whole-year goal. This is over the 89% five-year average.

With exports anticipated to fall off a cliff as South American harvest picks up, we see no reason for the USDA to make any adjustments to the export target. Technically, the March contract took out the 100-day, 200-day, and uptrend line turning the chart picture bearish.  The May contract took out the 100 MA but did manage to hold the 200-day MA.

We have been encouraging producers to be sellers over the past few weeks, as we didn’t think the fundamentals justified the prices we’re trading.  We see the November contract trading down to $8.84 for an early-summer low.  We currently view rallies as selling opportunities.

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