Technically Speaking

November beans not only reflect the tightening world supply situation on old-crop beans, but with South American crop production ratcheted lower due to drought and with November a nearly $1.50 discount to spot March, November beans sure have plenty of room to run. November needs to buy acres from corn to aid in what would appear to be a need to ration demand.

However, as we have written before, the soy market is overdone technically, with momentum indicators on the very top side of the overbought parameters. That doesn't mean there will be a corrective break soon, but the only question is when there will be. There are few natural sellers willing to sell unplanted beans in this crazy environment, so that leaves commercials and speculators to sell this market.

There are some better rain chances for dry southern Brazil and Argentina, this week, but it is doubtful they could be drought-busters. However, should the rains fall, we could see a setback. It would appear there is plenty of upside possible for new-crop bean futures; but beware of quick corrections at any time.

Kansas City new-crop July wheat gapped higher early Monday night and came within a dime of the contract high. Momentum indicators are still pointing upward, and with a rally and close over $8.71 1/2, look for another leg higher in wheat.

Despite U.S. wheat exports being down nearly 25% still and hard red winter supplies growing lately, the ongoing and expanding drought in key areas of the southwestern and Southern Plains has provided a bullish backdrop for prices, as has the ongoing Russian incursion into Ukraine.

World vegetable oil markets continue to soar, including U.S. bean oil futures. However, there are bound to be corrections from time to time, and indeed, bean oil futures are again leaning toward getting overbought. However, momentum is still strong and bullish and fundamentals could not be more constructive.

Bean oil demand is expected to pick up as renewable diesel production ramps up in the year ahead, not only for the U.S. but also elsewhere. In South America, much of the damage to the soybean crop has already been inflicted; the jury remains out on Argentina. Despite the underperformance of U.S. soybean export demand, it has picked up of late, and U.S. exporters will no doubt be called upon to pick up the slack in South American bean exports. The soaring crude oil futures market also has provided bullish impetus to renewable diesel usage.

The bullish mode of veg oils, including bean oil, should continue, but with corrections to be expected along the way.

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 Dana.Mantini@DTN.com

Follow him on Twitter @mantini_r

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