August Soybean Meal:
Since the high at the end of March, August soybean meal has plunged nearly $37 per ton. The bearish influence from weaker-than-expected China soybean demand, along with the sharp fall in crush margins, has sent bean meal futures to new contract lows. Managed money funds have amassed a net-short soybean meal position of over 43,000 contracts. Following the bullish acreage report on soybeans and corn last week, funds started to cover those shorts. For four straight days, soy meal futures rallied sharply, gapping higher on Sunday night. It appears bean meal may have turned the corner. Look for August meal to find major support at $2.90 to $2.92 on a setback. The fact that the short-term, 20-day moving average has crossed the 50-day moving average is another hint the trend may have turned.
Just like soybean meal, December corn futures features the short-term, 20-day moving average crossing the 50-day moving average to the upside. Although not foolproof, this moving average crossover typically represents a change in trend. The shocking 5-million-acre (ma) drop from March seeding intentions sent corn skyward, as heavily short funds began to buy in shorts.
New-crop corn appears to also be building a base with $3.45 and then $3.35 providing serious support on a corrective break. However, before we get carried away about a corn bull move, one must realize with trend at or above yield, we could have one of the largest corn carry outs in years. December corn is likely to encounter stiff resistance in the $3.60 to $3.75 area. Corn export and ethanol demand remains a stumbling block to a substantial rally without some sort of weather challenge in the summer.
November soybeans have exploded since the surprising USDA report last week revealed a planting number that was some 900,000 acres short of trader expectations. November beans rose sharply along with corn, as funds began to build a long in beans, while covering shorts in both meal and oil. As in meal and new-crop corn, the telltale moving average crossover also occurred in November beans. November beans appear to have major support on a fall to $8.80 and further major support another 20 cents lower at $8.60. November beans will certainly need more Chinese soy buying to keep the recent bullish trend intact. It's all about weather and China's buying plans over the next six to eight weeks. Major selling resistance lies just above $9.10 to $9.20 that could be tough to penetrate without more business or a drought-like weather pattern.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.
Dana Mantini can be reached at Dana.Mantini@dtn.com
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