Soybean traders are “nervously long” the market as they watch Argentina’s weather forecasts and wait for the crop to fill out, says Jerry Gulke, president of the Gulke Group. Prices for the oilseed took a hit earlier this week amid a rain event in the South American country. Rain fell where it was needed and didn't necessarily increase any flooded areas that weren’t already damaged.
“In the back of the minds of a lot of traders and end users globally is what happened last year,” Gulke tells “Weekend Market Report” host Pam Fretwell for the week ending Feb. 4, 2017. “All of a sudden [in 2016] it turned wet, and the crop deterioration in Argentina was much more than even the weather guys were talking about. … The bottom line is traders don't want that to happen again, so you’ve got them nervously long. We’ve got a lot of people on the speculative position long or positive the grains this year than we did last year. There’s always that thought in the media that wow, these traders could dump this stuff if it turns out to be a perfect crop over there. Well, we’ll see what happens.”
As the market watches radar patterns, soybean prices in the U.S. have begun to come down.
“We did rally all the way from the first of January all the way up, and we pretty much retraced 80% of that now,” Gulke explains. “Monday showed exactly what the weather guy said. It rained in the dry spots [in Argentina] and didn’t rain in the wet spots. And any rain in the wet spots what they’re saying now is the damage is done whatever that is … Those ponds then dry down and they fill back up again. So they’re saying those areas won’t get any bigger than they were before.”
All of the attention focused on Argentina reflects the important role South America plays in fulfilling global soybean demand.
“It just shows how critical the need for a good crop in South America is in spite of all the rhetoric this year about us having a record crop,” Gulke says. “Think what would happen if we hadn’t had a record crop this year. We’d be really concerned about the availability of supplies.”