Analysts Warn of Soybean Volatility

July 19, 2016 05:00 AM

Don’t expect the roller coaster ride in the soybean markets to end any time soon.

“It’s the funds trading algorithms,” said Mike Florez of Florez Trading, speaking on U.S. Farm Report with Tyne Morgan.  “They hit the market with big numbers either way, and it creates a vacuum in the market. The more often it occurs, the more often people back away from it and so the liquidity is not what it once was. It’s just a function of the markets. It’s what we live with. It’s not just soybeans and corn. It’s across the spectrum. Volatility is here to stay.”

That’s particularly true for soybeans, which have seen a significant shift in supply and demand since March.

“It’s amazing,” Florez said. “We’ve gone from two months ago (having)a record supply—burdensome supply (of soybeans). Now we’re talking potential shortage.”

That change in supply expectations is making soybean prices highly sensitive to new information, particularly where weather is concerned.

“We’re right in the heart of potential weather markets and weather forecasting for soybean production,” said Craig VanDyke of Top Third, also on U.S. Farm Report, who said that any changes—up or down--to estimated yields could have a big impact on supply, demand, carryouts and prices. “Those small, minute adjustments are going to play a role on the volatility in the soybean market,” he said. “We’re seeing that as forecasts change, and (that new information) piles on top of less liquidity, overnight markets, and ultimately the funds moving things around.”

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