Soybean Sell-Off Linked to Export Cancellations

December 21, 2012 10:00 AM
Soybean Sell-Off Linked to Export Cancellations

This information is provided by Archer Financial Services, Inc. 800-933-3996.

The corn and soybean markets made their highs for the week on Monday and it was mostly downhill from there.

The corn market continues to be plagued by lack of export demand. This left the market searching for lower levels that may stir dormant export business. It has been discussed for weeks how demand for U.S. corn would improve as Brazilian corn supplies dwindled, however apparently that export competition still exists.

In addition to poor export demand, improving moisture conditions in the U.S. and lack of a weather event in South America has kept buyers on the sidelines. On a technical note, fund selling picked up once the November price lows below $7.15 basis March Corn were violated on Wednesday.

The soybean market plummeted over $1 from its high made early in the trade on Monday, yet settled less than $.40 lower for the week following a price recovery on Friday. The catalyst for that sell off was a series of export cancellations to China and unknown destinations. In all, over 30 million bushels of previous export sales in soybeans were cancelled this week.

It has become apparent that China had overbooked their soybean needs and are in a position to revise those purchases in light of the expected record crop from South America. It is expected that export demand for soybeans will remain somewhat tepid for a while and largely tied to South American crop conditions moving forward. This will leave market "Bulls" looking forward the January 11th Production Report to provide a boost to the trade.

In addition, a return focus by the investment community to agricultural commodities as an prosperous asset class may also take grains back toward the upper end of their recent trading range after the first of the year.

I would like to wish everyone a very Merry Christmas and safe travels this holiday season!

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