Since August, soybean oil has plunged as much as 16 cents per pound. Despite what has been and continues to be a solid outlook for increased capacity and usage of bean oil for renewable diesel production, soybean meal has been the most impressive soy product with a record pace of exports. However, the outlook for renewable diesel usage looks bright, with more plants set to open in the coming year. On top of that, cash crush margins have been running consistently above $3.00 in many Midwest locations, and last week's Fats and Oils report showed a sharp drop in bean oil stocks to the lowest level since 2021.
Granted, things could change with a surprise increase in soybean yield on Thursday's November WASDE report, but the extent of the break in bean oil seems to have been overdone. Although Monday trading is not complete, and early strength may not last, the chart pattern with a close above 50.15 (currently at 50.78) would result in a bullish chart reversal pattern called a "bullish engulfing bar," leaving the door open for further strength. In one other aside, in order for this to result in a buy signal, January soybean oil would also have to close higher Tuesday. The jury is still out, but we could soon see a turnaround in bean oil futures.
Although not an exact double bottom, March corn came close enough on Friday to the recent low -- within 3/4 of a cent -- before turning and closing sharply higher, and nearly a dime above that low. On early Monday, corn futures are just modestly higher, but it is not uncommon for corn to forge a low in the October-November time frame as the last 20% of the corn harvest is collected. Export sales remain 26% higher than a year ago, and ethanol production reached an 11-week high last week. U.S. corn in the December slot is now cheaper than Brazil on an FOB basis. March corn is currently trading less than 8 cents away from the intersection of the 20- and 50-day moving averages. A rally and close above could lead to managed money funds covering part of their 144,000-contract short position in corn. However, we do have the November WASDE report out Thursday, and the market seems to be biding its time until yield results are updated.
Dana Mantini can be reached at Dana.Mantini@DTN.com
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The comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of commodities, futures or options involve substantial risk and are not suitable for everyone.
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