Del.icio.us  Digg  facebook  MySpace  Twitter  Google  Bookmark Me  LinkedIn  StumbleUpon  Permalink

Weekly Soybean Review

Beans in the teens mean that even a modest percentage correction can take prices a buck lower quickly. That's what is happening in the bean market, and the question now is whether this is something more than just a typical cleansing. Three factors should decide the issue.

The first is China's appetite for soybeans. It's huge, of course, but there were indications this week the need for imports may be satisfied in the short run. The government plans to auction off reserves, the type of move that in the past hasn't drawn many buyers due to logistics and questionable quality. Now, there are indications local processors may be more willing if the price is right, due to crush margins that turned negative for the first time in more than a quarter.

The second factor is also a global one. Until the last couple of days soybeans appeared to tracking moves in the dollar closely, a result of the worsening debt crisis in Europe. As investors shed risky assets they bought dollars, and that bearish mindset spilled over into beans. The final impetus for selling this week came from funds, which have begun to unwind their record bullish

bet. This is the type of selling that can feed on itself, and it's only just gotten underway. A potential double top in the July/November old crop/new crop spread could be the next trigger, with July having plenty of downside targets.

Still, my current projections for old crop stocks tightened again this week, due to strong export shipments and NOPA crush. That has the potential to keep projected new crop carryout very tight, making the market very sensitive to weather scares this summer. These could start even before planting is finished if dry conditions from the southern Plains into the Southeast threatened double cropping.

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 Advisor. 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.