Typically, the markets are pretty quiet during short holiday weeks like this one. But this week, U.S. soybean prices ping-ponged as the trade anticipated a lowering of Argentina’s export taxes following the election of a new president on Sunday.
"You hear the old cliché, 'Buy the rumor, sell the fact,' and in this case in Argentina it was, 'Sell the rumor in anticipation of the market going down,' and it did,” says Jerry Gulke, president of the Gulke Group.
The January soybean contract dropped about 10 cents to a new low Sunday night, but then reversed 20 cents off that low by Monday’s close, a move known in the trade as a key reversal.
“Key reversals are not always indicators of a top or bottom being in the market, but many times they are red flags to say that a change in trend could be coming soon,” says Ted Seifried of Zaner Ag Hedge Group. “This may be the case in the soybean market right now.”
But Gulke says that what happens on Monday will be key in determining whether soybean prices rally or tank.
“By Monday, traders will come back from that long vacation and then we start the first week of December. That’s pretty important,” Gulke says. “If we can continue what appears to be some buying action in December,” then a new price trend could develop.
“We don’t want to take out the November lows,” he explains. “If you take out the November lows, you’ve got to revalue things again. The trend didn’t really change, we just had a bump in the market.”
On Wednesday, soybean, soybean meal and soybean oil contracts were all higher. If traders come back from the holiday on Monday ready for action, then there could be hope for soybean prices this year.
“If we can get a good strong Monday, then maybe we’ll rally right on into the end of the year,” Gulke says.
Listen to his analysis of the Argentina situation—and its effect on prices—below: