The weekly chart pattern on bean oil futures, called a bullish engulfing bar or line in Japanese Candlestick charting, typically illustrates a slowing trend and a possible pattern reversal. The key to creating a technical buy signal is that bean oil, in this case, must also finish higher in the following week (this week). That remains to be seen. However, with the expected ramp up in renewable biodiesel capacity and demand in the coming year, the fundamental outlook for soybean oil certainly continues to look longer-term bullish, with the oil share of the soybean crush increasing steadily. So, in addition to the weekly chart signal, the fundamentals remain in sync for an ultimate turnaround. We shall see if the weekly strength follows through.MAY CORN FUTURES:
For eight consecutive days, and for 11 of the past 12 days, May corn futures have closed lower. Yes, there are reasons to be bearish corn, with the largest ending stocks level in five years, and with Argentina's corn crop set to surge sharply from the previous year's drought-ravaged crop. The jury on Brazil is still out, with some 70% of the major corn crop (safrinha) yet to be planted and questions remain about the area. However, if the USDA's lofty estimate of 156 million metric tons (mmt) comes to fruition, there are even more reasons to be bearish. Right now, Brazil's answer to the USDA -- CONAB -- has Brazil's corn crop more than 10 mmt below that of the USDA.
Conflicting with all the bearish reasons for corn to go lower is growing speculative interest in the short side of the corn market. The noncommercial corn position as of last Tuesday is within 5,000 contracts of a record short. The managed money fund short, at 293,000 contracts, is within 8,000 contracts of the largest short since June 2020. At some point, the large speculative short position will add fuel to any bullish reversal that could occur. Right now, the trend is certainly the friend of fund managers, but keep an eye on that to change. It will be a question of when, not if, such a reversal occurs, especially as we enter a seasonal period of strength.
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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