Soybeans don't go lightly from the leadership position of the market when they're on a tear. All it took this time was the near-outbreak of a shoot war in the Black Sea.
That region produces a lot of wheat and corn, but not many soybeans, at least not yet. After following the rally in wheat, which helped it recover from Thursday's big bearish reversal lower, beans turned down again today. Whether or not this second reversal means the rally is over remains unclear, because reversals in bears are almost as numerous as Russian soldiers in the Crimea this week.
Without a clear tie to the conflict, beans couldn't follow corn or wheat, or gold or crude oil for that matter. Instead, they fell victim to the risk-off trade. While we've focused on South American weather in soybeans, they've also shown a very strong correlation to the stock market in recent weeks. That may be a coincidence, but today it wasn't, especially with big speculators leaning quite long.
When the dust settles in Ukraine, the market may find that not much changed in the soybean market. There's still no wholesale move by Chinese buyers to cancel previous purchases from the U.S., even though crush margins on soybeans imported from the Gulf are way down. If anything, China appears to be buying still from the U.S. For now, this appears to be more than logistics, but some concern that supplies from Brazil and Argentina may not be big enough.
The March 10 USDA may finally confirm this. I've penciled in a loss of 150 million bushels already. That's not enough to be a major problem, but it could keep U.S. supplies tightening. The government should knock 10 million bushels or more off carryout in next week's March 10 supply and demand report but has appeared reluctant to make cuts yet.
You can download the complete report using the link below.
Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.
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