As record U.S. soybean export commitments and record U.S. crush continue to paint a bullish picture for U.S. ending soy stocks, one has to look at the monthly chart to see where this rally can take us next. That level appears to be $14 on March soybeans.
Adding to the bullish scenario and the glaring need for prices to rise even further to slow demand, is the fact that China's resurgent economy and hog industry has propelled their own soy crush 24% higher than the previous year. May soybean meal futures in China on Monday hit a new high of close to $528 per metric ton (mt) -- a glaring incentive to import more soybeans from the U.S.
The monthly soybean chart has revealed eight straight higher closes, as U.S. soybeans have been the origin of choice following a dry start, delayed planting in South America and scarce old-crop stocks. With Brazil's soybean harvest delayed by possibly two to three weeks, U.S. soybeans continue to be the origin of choice.
The one thing to be cautious about is that the daily soybean chart is getting overbought, and funds are long a large position in soybeans, meal and bean oil of close to 400,000 contracts. However, right now, the bulls are in total control.
March Soybean Meal:
Mirroring the soybean chart is the soymeal chart. A look at the monthly continuation chart for soybean meal shows the next resistance to be up around $470 to $475, versus Monday's high of close to $441.
The record U.S. crush pace, record U.S. soy export pace, surging China crush and demand, and the recent 3-week Argentine strike have combined to push soymeal to new contract highs.
As is the case in soybeans, the daily soymeal chart reflects an overbought technical picture and a growing speculative long in the entire soy complex, including meal. The overbought technical and overweight speculative long may result in a setback in this bull trend before the markets seek higher levels.
Since the early August triple-bottom low near $3.31 on March corn, corn futures have rallied nearly $1.67 per bushel to Sunday night's new contract high.
While the corn balance sheet is not nearly as bullish as the soybean balance sheet, corn demand is rising and corn stocks are tightening, as U.S. corn appears to be the world's cheapest feed grain all the way through spring. Corn sales remain sharply above a year ago, and with China's internal May corn futures reaching a new contract high of over $10.70 per bushel, China's incentive to buy more U.S. corn remains stronger than ever.
With funds estimated to be carrying a net-long approaching 400,000 contracts, and with that market also overbought, we are bound to see some setbacks on this bullish run. However, a look at the monthly continuation chart on corn shows that a run above $5.20 on March corn could send this market soaring as high as $5.50. South American weather will play a huge role in determining if this happens. With Argentina, southern Brazil and major producing province Mato Grosso exhibiting a low soil moisture profile, the U.S. corn export program has the potential to reach even higher levels should this South American dry pattern continue.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grain and soybean futures involve substantial risk and are not suitable for everyone.
Dana Mantini can be reached at firstname.lastname@example.org
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