March soybeans, lately driven by falling South American soybean estimates and improved demand, may have gone too far, too fast. Technical momentum indicators are approaching very overbought levels and there appear to be some very good resistance levels just above the Friday close at $14.96 to $15.10.
Weather has certainly been mostly bullish, but recent rains in Argentina improved conditions considerably. The forecast appears to be dry into the middle of February and export sales appear to be picking up. Last Friday, USDA announced sales to Mexico, unknown destinations and even China; but the China business was for new crop 2022-23. Again, on Monday morning, China bought a small parcel of mixed old and new crop. U.S. soybean export sales still remain down a hefty 24% versus a year ago.
Although the current rally, which saw March hit a new contract high on Friday, could continue, caution is advised over the next 10 to 20 cents to the upside.
March corn futures have been on a roll, rallying $1.26 per bushel since the low in mid-October. Yes, there are certainly valid reasons for the rise, with drought conditions in both southern Brazil and Argentina the past few months. There is a very good opportunity for U.S. corn exports to pick up some of the slack from lower South American production. Also, the threat of a Russian invasion of Ukraine could possibly stifle shipments from the Black Sea ports. However, corn, like beans, has gotten a bit on the overbought side, technically, and we could see a setback until we see further proof of lower production. Monday's retreat from what could be a double top on the weekly March chart could set the stage for a further correction. After all, it's a weather market and volatility will continue to be high.Chicago March Wheat Futures:
Despite the ongoing border standoff between Russia and Ukraine, and the potential bullish backdrop of that, the wheat markets early Monday are acting a bit tired. Chicago March, should it close below $7.75, as it shows currently, would be a bearish engulfing line pattern on the charts.
While any Russian invasion of Ukraine is likely to make U.S. wheat more attractive, second only to the European Union, it is uncertain whether Black Sea port shipments will be drastically impacted. U.S. wheat exports and inspections remain down sharply and there is some much-needed moisture headed for the drought-impacted western and Southern Plains.
Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.
Dana Mantini can be reached at Dana.Mantini@DTN.com
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