Soybean Futures Continue To Climb The Charts

February 28, 2012 03:04 AM

What Traders are Talking About:

* Soybean futures building strength. Fundamentally, soybean futures are pulling support from recent strong demand and expectations China will buy more U.S. soybeans amid declining South American crop estimates. In addition, soybeans appear to be making a late (too late?) push to add some acres as soybean futures are rallying while corn and cotton futures are struggling to find buyers. On the technical side, soybean contracts have pushed above their respective 200-day Moving Averages, which is attracting fresh speculative buying. For the month so far, funds have bought 51,000 contracts (255 million bu.) of soybeans with only five days where they weren't net buyers. If soybean futures can successfully clear the psychological $13.00 hurdle and turn that level into solid support, it could attract additional buying interest.

The long and short of it: Soybeans are strong (and strengthening), but I have some concerns in that the market isn't getting any help from corn or wheat, and soybean futures are now overbought.

* Keeping an eye on South America. Rains late last week and any precip this week will be too late for soybeans in Parana, Brazil, according to our South American crop consultant Dr. Michael Cordonnier. The rains, however, will help later maturing soybeans in Rio Grande do Sul, Brazil. In Argentina, the pickup in rainfall activity the past two weeks has stabilized crops there, although one farmer contact in the country says some areas are now fighting too much rain after the prolonged heat and dryness -- go figure. Despite the more favorable weather, private South American crop estimates continue to slide. With crop estimates declining and Brazil facing some logistical problems at ports, South American soybeans are priced higher than U.S. beans. That should keep near-term demand for U.S. supplies strong.

The long and short of it: As long as demand for U.S. soybeans stays strong, there's a strong source of support under the market -- and reason for traders to keep pushing futures higher. But when demand starts to wane, soybean futures will likely struggle to maintain current price levels.

* Euro-zone confidence rises. A European Commission survey of overall economic sentiment across the euro-zone rose for a second consecutive month in February, although business sentiment remains negative, as does consumer confidence. Some are saying the improvement in economic sentiment suggests the euro-zone may suffer only a mild recession this year. The EU's top economic official Olli Rehn now expects a recovery in the second half of the year if EU leaders can agree to a large enough financial firewall package to keep countries from defaulting on sovereign debt. .

The long and short of it: The data signals what virtually every knows -- the euro-zone has a long, bumpy road to recovery -- even though economic sentiment is slightly better.


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