Can Soybeans Stay Above $9?

September 28, 2016 08:48 AM

Soybean futures could be  facing headwinds from increased production in the United States and South America, according to analysts.

Prices are edging downward as farmers increase soybean acres after hitting record highs earlier this year on South American weather woes that slashed production in Brazil and Argentina.

And even more downward pressure could come from the upcoming USDA Grain Stocks Report, analysts caution.

“My biggest fear, and I would suggest that the trade has the same fear, is that USDA "feeds the bear" with bigger-than-expected supplies on Friday's Grain Stocks Report,” says Mike Zuzolo, president of Global Commodity Analytics, based in Atchison, Kan.

Prices could easily decrease by around 3%, down as much as $9.15, according to Zuzolo.

“I'm of the view that soybeans could possibly be pushed down toward major long-term support of $9.15-$9.20," he says, adding that this expectation is only if the U.S. and South America don't run into any other major production problems.

Another analyst also expects harvest pressure to push down soybean futures.

“I look for ...  $9.15 or maybe even below $9.00 in the upcoming weeks,” says DuWayne Bosse of Bolt Marketing in Britton, S.D.

With already relatively high yield expectations, coupled with a possible increase by  USDA’s yield estimate from 50.6 bushels per acre to 51.5 bushels per are, total production could increase by 90 million bushels, Bosse says. If demand remains the same, ending stocks could more than double, rising to 455 million bushels, he says. 

However, Bosse says prices should recover in the long-term.

“As bearish as my comments sound, I am not bearish soybeans long-term," he says. "One thing we all know is that global soybean demand continues to grow every year."

More pressure to weaken soybean prices could come from a rebound in South American production in 2017, and an increase in U.S. production. If Brazil produces a large soybean crop, U.S. exports would decline in spring of 2017, according to University of Illinois ag economist Darrel Good.

On the other hand, China’s soaring demand for soybeans has kept U.S. ending stocks below 200 million bushels every year except one since 2008, according to Good, and Friday’s USDA report is expected to show marketing year soybean ending stocks of 195 bushels, he says.

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