Technically Speaking Blog
November Soybeans: A Dead Cat Bounce?
Despite this week's modest strength so far in new-crop November bean futures, there are many factors standing in the way of this rally extending very far. So far with zero new-crop China purchases of U.S. soybeans on the books, favorable weather to the middle of August and numerous private analyst forecasts for a record soybean yield, the rising supply and sagging demand outlook does not bode well for future strength.
Without a quick resolution to the U.S.-China trade standoff, it is very possible U.S. ending soy stocks in 2025-26 could rise to over 500 million bushels (mb) and possibly approach 700 mb. That, coupled with the record Brazilian soy crop and lower Argentine export taxes, will make sustaining any rally difficult in the absence of an abrupt change in late August weather, or a new China trade commitment. Look for November beans, on a further advance, to run into major selling in the $10.10 to $10.20 area and just 12 to 20 cents above today's value.
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As they say, the "trend is your friend" and that is likely being echoed by fund managers who have once again added to their net-short position in both Chicago and Kansas City wheat. With plentiful supplies in both Russia and the European Union seeking wheat demand following their harvests, the U.S. should run into plenty of competition in the coming months for wheat business.
However, Chicago wheat has reached a point where it is extremely oversold and U.S. wheat export sales are so far exceeding USDA expectations. It could be a quality problem after Russia suffered some issues with their wheat, but typical U.S. wheat importers have stepped forward to buy supplies with these cheap values. Chicago September is nearing the $5.00 level where it should find plentiful support.
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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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