Technically Speaking

How much bearish news can one market take? The soybean market has certainly had its share of it lately. One million additional soybean acres, along with the estimate for a record yield of 53.2 bushels per acre (bpa), 154 million bushels (mb) more soybeans in August than in July, and a comfortable, if not burdensome carryout of 560 mb of soybeans in 2024-25. That is the bearish supply side of the equation, but there is still some key growing weather ahead.

The next two weeks seem to show a much warmer and drier finish for the crops than farmers would desire. The Delta has had a dearth of good moisture over the last several weeks and extreme temperatures in the Western Corn Belt may have clipped potential.

On the export side, the U.S. is the best and cheapest choice for world importers, and subtly, China is starting to cash in on the cheap prices. On Monday, China bought another 11.8 mb of U.S. beans, with unknown destinations listed as the buyer of another 4 mb. China is still thought to have substantial quantities to buy into January, and the U.S. is the only game in town. Brazil's meteoric rise in the soybean basis has priced them out of contention.

Domestic crush continues at a record pace, with July's NOPA showing 182.9 mb crushed -- a record large amount for that month. Funds in the last week reduced some of their record net-short in soybeans but remain close to 170,000 contracts short beans along with 80,000 contracts short in bean oil.

It is difficult to imagine how much more bearish news can yet be thrown at the soy market; but for now, the bearish funds remain in control. Typically, in big crop years, the bearishness is baked in early and seasonal lows are often forged in August. We shall see if history repeats itself and we get a much-needed rally in soybeans.

A look at the Kansas City September wheat chart does not give a bullish wheat trader or farmer much confidence. Again, on Friday, KC fell to another new contract low as Paris wheat futures fell again. However, there are some bullish world developments I don't think fund managers and traders can ignore forever. Wheat production in France -- with the French crop estimated to be the smallest in years -- and Germany has also fallen (down close to 13% from last year) and so too has quality from heavy and constant rain during harvest. Russia's spring wheat areas are also getting far too much rain and estimates for the Russian crop have now fallen toward 82 mmt, down 12 mmt from early season projections. It is much too dry in Argentina and Indian wheat prices are near the yearly high, with that country likely to have to import some wheat this year. Funds remain net-short both Chicago and KC wheat to the tune of a combined 106,000 contracts. Ultimately, the fall in major exporter wheat stocks and quality should translate to better demand for the U.S. quality hard wheats. Funds, at some point, will need to cover their short.

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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.

Dana Mantini can be reached at Dana.Mantini@DTN.com

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