Soybean technicals suggest a market correction ahead, analyst says

Harvest pressure could trump China purchases.

Even with the aggressive buying from China, a second lower close in a row for November soybeans suggests that the market is in a corrective break mode.

Increased harvest pressures could add to selling pressures, and with the recent surge in open interest, speculative long liquidation selling is also a threat. In the last COT update, managed money traders held a net long position of 191,774 contracts. 

November soybeans closed lower on Tuesday after trading in a 23¾¢ range. A recovery in the stock market helped offset a further advance in the U.S. dollar, and more buying from China helped support the market early in the day. However, the extremely overbought condition of the market plus talk that harvest activities are picking up steam helped to trigger the late selloff. 

Exporters reported the sale of 266,000 tonnes of U.S. soybeans to China and 264,000 tonnes to unknown destinations. There is very little rain in the forecast for the next two weeks, and harvest should accelerate. 

Global demand for U.S. soymeal has been coming in stronger than expected, as production from Argentina has been disappointing. Argentina soybean producers continue to want to hold their inventory as a currency hedge. 

The Argentina Grains Exporting Chamber told Reuters that soybean crush this year will reach just 38 million tonnes, down from 42 million in 2019. Bunge’s Brazilian unit has been forced to buy three cargoes of 30,000 tonnes each from Uruguay in the past few weeks, according to traders. 

Very strong exports early in the season have left soybean supply in Brazil tight. Imports through August quadrupled from the same period last year to 477,372 tonnes, Economy Ministry data show. Almost all of that came from Paraguay. But Uruguay is also appearing among the suppliers. Brazil may import 850,000 tonnes in 2020, the highest since 2003.

MARKET IDEAS 

November soybean short-term resistance is at $10.20 per bushel and $10.30, with $10.07 and $9.94 as initial support. If the short-term trend turns down, initial key support for December meal could be seen back at $322.40 per short ton. Soybean meal resistance is at 348.00.

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


*** 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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