November Soybeans At A Critical Technical Juncture

June 6, 2013 01:28 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn and wheat futures are narrowly mixed, while soybeans are mostly 2 to 7 cents lower. Given the choppy overnight trade and lack of market-moving news, weekly export sales will likely set the tone for the open at 8:30 a.m. CT. Cattle and hog futures are expected to open slightly firmer this morning.


* A technical look at November soybeans. November soybeans are pulling back following the strong spring runup, which was the contract rally nearly $1.50 from April 24 to June 3. To see the contract correct after such a sharp runup is not alarming. But the contract is teetering on the edge of the cliff technically. If it slides much further, it could signal an extended price retracement is underway. November soybeans are at risk of closing below the $13.00, which would be psychologically negative. More importantly, the contract is at risk of falling back into the downtrend drawn off the September 2012 and February 2013 highs. If that happens, the recent spike of this downtrend would appear to be a bull trap. The initial downside target is then the pivotal $12.80 level, with stronger support around the $12.50 area. If resistance-turned-support holds, it would project November soybeans to a potential test of the contract high.

The long and short of it: If key near-term support is violated, an extended price pullback would be likely. But if the contract sets back on top of old resistance and that new support holds, it would be technically bullish. November soybeans are at a critical juncture technically.

* Warmer, drier forecast next week. The proverbial "better" forecast next week is being floated around by several forecasters as conditions are expected to turn warmer and drier. But many are skeptical as 0% chance of rain has turned into heavy downpours in some areas throughout the spring. With key planting decisions being made now -- or very soon -- how the forecast for the weekend and next week shapes up will be key in determining the final acreage mix for corn and soybeans.

The long and short of it: The hope of improved weather has repeatedly been dashed this spring. If next week's forecasts for warmer, drier conditions don't pan out, it could trigger another rally in corn and bean futures. But if the better conditions materialize, it would be price-negative as crops have plenty of moisture to grow and need heat/sunshine.

* China seen importing more meat and oilseeds, less cotton. A joint report from the Organization for Economic Cooperation and Development (OECD) and United Nations Food and Agriculture Organization (FAO) says China's demand will outpace its agricultural production by 0.3% per year over the next 10 years. As a result, Chinese imports, especially for meat and oilseeds is expected to rise. The OECD/FAO report forecasts Chinese meat imports to rise by 3% per year to 1.7 MMT by 2022, with beef imports expected to lead the way with a 7% annual growth rate. Chinese oilseed imports are expected to rise 41% to 83 MMT by 2022. Feedgrain imports by the world's most populous country are forecast to rise to 13.2 MMT by 2022. But Chinese cotton imports are expected to fall to 1.9 MMT by 2022 due to declining domestic demand.

The long and short of it: The outlook is positive for meats and soybeans as China is a major market for U.S. soybeans and pork. China currently doesn't import U.S. beef due to our use of ractopamine, but that's a potential growth area for the United States over the next decade -- if we can get that barrier removed.


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