Have Old-Crop Soybeans Topped?

May 24, 2013 12:54 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are 1 to 3 cents lower, soybeans are mixed with a downside bias and wheat futures are mixed with a slight upside bias. Corn and soybeans "feel" a little heavy this morning, so I would expect a weaker open at 8:30 a.m. CT. For wheat to hold onto overnight gains, the U.S. dollar must remain under pressure. Cattle and hog futures are expected to open steady to firmer this morning


* Have old-crop beans topped? Price action was very volatile in July soybean futures Thursday, with the contract posting a 59 1/4-cent trading range and finishing 47 1/4 cents off the high. In technical terms, July soybean futures posted a potential exhaustion top on the daily price chart. But it wasn't just the technical price action that suggests old-crop soybeans have topped. Basis has declined nearly penny-for-penny with the rise in futures this week as the contract has risen above the top of the extended, choppy trading range that has contained prices since last fall. Basis weakness as futures have rallied is strong evidence domestic soybean crushers and exporters have found a cash price that's "good enough" to keep them supplied.

The long and short of it: The price action in July futures and spot basis signals old-crop soybeans have topped -- for now. But that doesn't mean there won't be another upside push later in the marketing year given the tight supply situation.

* Argentine port strike settled. Much of the strong runup in old-crop soybean futures this week has been tied to the port strike at Argentina's main grain export hub at Rosario. Reports yesterday morning that unions had rejected exporters' offer and the strike would extend into next week helped fuel the strong runup in July soybeans. Traders feared this could turn into an extended work stoppage. But around midday, reports surfaced that union leaders had reached a deal with exporters and port workers would return to work. That took the wind out of the market's sail and resulted in futures falling sharply from the daily highs as outlined above.

The long and short of it: The soybean supply situation remains very tight, which in and of itself is price-supportive. But the market has now lost the catalyst -- the Argentine port worker strike -- that's needed to fuel explosive, sustained buying interest.

* Memorial Day weekend ahead. Grain and livestock markets will observe normal trading hours today ahead of the extended, holiday weekend. All markets and government offices are are closed Monday, May 27, for Memorial Day. Electronic trade for grain futures will resume at 7:00 p.m. CT on Monday, while livestock markets will start next week's trade at 9:05 a.m. CT.

The long and short of it: As you celebrate Memorial Day with relatives and friends, take a moment to remember why we have this holiday -- to remember those who have gone before us, especially those men and women who died while serving our great country. Have a happy and safe holiday weekend.


Follow me on Twitter: @BGrete

Need a speaker for a seminar or special event? Contact me: bgrete@profarmer.com

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