The corn market finished strong this week while the soybean markets struggled to new lows for the week on Friday. The soybean market was besieged by a number of negative stories this week, some of them were factual, some are yet to be confirmed rumors and some were a little of both.
The week started with the weekly export inspections report showing that the US did not ship any soybeans to China for the first time since last August. This is of concern as there are over 75 million bushels of sold, but unshipped US soybeans to China that are vulnerable to cancellation.
The other fact that hit the soybean market to end the week was the disappointing NOPA crush report that came in 6 million bushels below the market’s expectations. In between, were rumors of China cancelling soybeans purchases from Brazil and the U.S.
Neither of these could be confirmed to this point. Finally, a mid-week announcement that Brazil was going to eliminate a soybean oil export credit raised concerns that soybean oil supplies would build in that country and Brazilian soybeans that would normally be crushed domestically would make their way into the global trade.
Although the tax change is based in fact, some Brazilian contacts state that they expect little impact on domestic crushing margins. Old crop soybeans closed below their 50-day and 100-day moving averages on Friday, yet we suspect fundamental support will be uncovered at these lower levels next week.
The corn market seems poised to shift its focus from what was primarily an old-crop supply issue, to growing concerns that the current weather pattern will not be conducive to an early start to spring plantings. We are nowhere near a weather market, but already analysts are backing down on their corn acreage figures near 99 million acres.
I am not sure whether these adjustments are based on economics or on weather, but what it has done is temporarily raised the price floor and reduced the immediate urgency to aggressively sell December corn below $5.50. This has led to a short covering bounce that we expect will last at least into the middle of next week. We would look at a move in December to the $5.70-$5.75 area in which to extend sales or to set a price floor below the recent lows using an option strategy.
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