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Soybean Market- Guest Analysis- Dan Manternach- Feb 9, 2018

Grain Marketing

Thursday’s WASDE had little cheer for bean bulls – but the market handled it well! Prior to release, trade guesstimates for soybean ending stocks averaged 486 million bushels, up 16 million from January’s 470 million due to a lagging export pace and the fact that red hot IV quarter sales to China had been mostly supplied by Brazil. Turns out the trade underestimated the increase. USDA whacked its soybean export estimate by 60 million and added it to ending stocks, bushel for bushel.

The soybean market took an initial hit, but then bounced back to close higher for the day. Several factors in play as follows:

  • Despite the hike in ending stocks, the midpoint of USDA’s estimated range for average U.S. farm price didn’t budge. It’s still at $9.30 in a range from $8.90 - $9.70 vs. last month’s range of $8.80 to $9.80.
  • The global soybean picture was a price-friendly surprise. Pre-release trade estimates averaged 98.6 million tons for global soybean ending stocks, the same as last month. But the actual figure came in half a million tons lower, at 98.1 million. A 2 million ton cut in estimated Argentine soybean output more than offset modest increases in production elsewhere.
  • Brazil’s soybean crop is mired in mud. It’s been extremely wet, slowing the harvest. I saw one report (with aerial photo) of an estimated 3,000 loaded trucks mired in mud in a 40-mile stretch of Brazil’s infamous “dirt road highway” from the hinterlands.

 

Here’s the chart picture for beans: 

March managed to probe initial overhead resistance late last month, but closed above it only

march soybeans 2-9-18

once and then sold off. Now we’ve gone up to just “touch” that same resistance following Thursday’s WASDE report. There’s an uptrend line and another important chart “support” zone intersecting at $9.75 in the March. It’s vital that support turn back any renewed selling.

  • Crush is running behind the pace needed to hit USDA’s current forecast, but crush margins are quite good and the “gap” in crush pace is closing, not widening. 
  • For all the reasons listed, consider the futures prices below in “no man’s land”, trading between support and resistance. Sell only enough to meet cashflow needs to mid-March.
 
As for new crop November beans, it’s a similar story; futures caught between support and resistance. 
  • november soybeans 2-9-18But if you haven’t made any new crop sales, it’s unwise to turn down futures above $10. It’s a very good place to start light pricing with plans to sell in larger and larger increments when the rally resumes. That’s called “scale up selling” into rising prices and concentrates your larger sales at higher prices. Avoid the trap of second-guessing yourself and selling smaller and smaller amounts as prices rise.

 

The views expressed in this article are the author's alone and not those of Farmer's Business Network, Inc., its affiliates or members. 

 


 

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