Technically Speaking

When working on the DTN Six Factor Strategies and recommendations for soybean meal purchases through 2025, my job has been fairly easy. Patience has usually been rewarded as the U.S. crush industry set monthly record after record, building stockpiles of meal and driving prices steadily lower throughout the year.

In recent months, however, the market has at long last shown some signs of bottoming. December meal futures put in a similarly impressive rally in early August before fundamental concerns, amplified by Argentina's two-day tax-free sales spree, again pummeled prices back to new contract lows. Since then, however, December futures have again soared higher, attempting on Friday, Oct. 24, to hit the first nine-day win streak for most active meal futures since December 2020. As far back as I looked to 2015, I could not find an instance of 10 straight sessions higher, which really puts the recent price strength into perspective.

From a fundamental viewpoint, the supply concerns certainly still linger, as a record U.S. crush pace is expected once again in 2025-26. As mentioned, however, from a technical perspective, meal futures are rallying with a conviction rarely seen over the past couple of years. First came the 50-day moving average ($283.70), which December futures pushed through like it wasn't even there. Then came the 100-day moving average ($287.00), a level that December futures had not closed above since March, again, no issues.

From here, it would seem the market has its sights firmly set on a challenge of August highs just below $300.00 per ton. At this point, however, the market is becoming rapidly overbought, and I cannot rule out a reset back toward the 100-day moving average, which may prove to be a great buying opportunity for those with feed needs through the end of the year. For what it is worth, USDA forecasted the season average meal price at $280 per ton in the September WASDE report.

Soybeans and soybean meal futures are understandably very highly correlated, and both have a historical seasonal tendency to rally through the final 2-3 months of the year following U.S. harvest lows. From a trader standpoint, although we don't have recent Commitments of Traders reports due to the ongoing government shutdown, it is safe to assume that noncommercial traders have rapidly covered short positions over the past week. Meanwhile, noncommercial soybean meal traders have not held a net-long position in futures for just under a year. It would seem that traders will have a decision to make as prices approach two-month highs.

From a historical perspective, meal prices remain very inexpensive, within the 15th percentile of the five-year range, to be exact, certainly leaving a lot of room to rally should the narrative flip to a more bullish outlook. Yet recent history would also suggest that meal rallies have simply served as selling opportunities, and there is no doubt we still have a lot to learn about meal's place within the new era of soybean crush value. For now, despite last week's $20 per ton vertical leap in prices, the path ahead for meal futures still seems to be a steep hill to climb, leaving me wondering if the rally has hit an exhaustion point on the approach to its biggest technical test yet at August highs. Time will tell, and it will be an interesting market to follow over the next few weeks.

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.

Rhett Montgomery can be reached at rhett.montgomery@dtn.com

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