Technically Speaking

Friday's 31-cent drop in November soybeans was a punch in the gut to producers who were just starting to see soybean prices gain traction last week on forecasts of drier weather and hotter temperatures ahead, especially for the western and central growing areas. Friday's selloff in soybean prices likely responded to a moderation of those earlier forecasts and, possibly, to news that a U.S. Court of Appeals in D.C. vacated earlier rulings by the Environmental Protection Agency (EPA), forcing EPA to take another look at its denials of small refinery exemptions in 2022. The EPA news was more directly related to ethanol production but could have also had a bearish price influence on all biofuel feedstocks as soybean oil and canola prices were also hit hard.

DTN market comments have frequently explained how fundamentally cheap November soybean prices have become, roughly 12% below USDA's estimated cost of production in 2024, a level not seen since 2020, the panicked days following the initial arrival of Covid. With prices near their lowest levels in over three and a half years, the trend obviously remains down, but there is another reason to suspect long-term support may be near.

In general, November soybean prices spend most of their time trading between plus and minus 10% of their 100-day average. Friday's closing price of $10.48 1/2 was within a dime of the bottom of that range, now at $10.39. There is no guarantee prices won't trade below their normal range, but it takes an extreme situation to pull prices outside the range for very long.

Recently, prices briefly traded below the range in July 2022, when outside markets were worried about the threat of recession and in May 2023 during a panic about regional banks. It surprises me to see soybean prices did not exceed the lower end of their normal range in the spring of 2020, when fears ran high over the outbreak of a global pandemic. The last time soybean prices traded significantly below the lower end of their range for more than a brief time was in 2018 after China responded to U.S. tariffs with their own tariff on U.S. soybeans.

Again, there are no guarantees soybeans won't trade lower and there is no sign of a change in trend yet; but from many perspectives, today's soybean prices are extremely cheap and long-term support should be near. For noncommercials feeling confident about the 138,423 contracts they held net short as of July 23, it may be a good time to step back and take a look at the larger perspective.

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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.

Todd Hultman can be reached at Todd.Hultman@dtn.com .

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