Soybeans Plunge for Second Day in a Row

December 20, 2016 04:42 PM
Soybeans Plunge for Second Day in a Row

Soybeans plunged for the second day in a row Tuesday, pushed down by rains in South America, a stronger dollar and speculative money from funds, according to analysts.

January soybeans fell another 16 1/4 cents to $10.05 ¼, raking up a total loss of 31 ½ cents in two days, while March corn went down 3 cents to $3.50 ¼. Chicago wheat also slid 1 3/5 cents to$4.03 1/5.

“The weakness in soybeans was an accident looking for a place to happen,” says Dale Durchholz, senior market analyst at AgriVisor, in Bloomington, Ill.

When rains fell in dry areas of Argentina, with more rain forecast for this week and the coming weekend, bullish sentiment went away and left very little to support the market, Durchholz explains. The dollar also strengthened, moving to a new high Tuesday, he notes. With the stronger dollar and falling soybean prices;  corn and wheat also trended lower in the “holiday” market, he observes.

“When you bundle all of this up in package and it is the holidays, typically once you get past Dec. 15, a lot of people start packing their bags, squaring their positions. You can see a market where little things can trigger a big, stronger move,” says Durchholz.

However, January soybeans still run a downside risk of soybeans falling to a range of $9.85 to $10, because it is just the start of South America’s growing season, he says. Although the first crop of soybeans will be harvested in January in northern Brazil, the South American harvest won’t be completed until March, he notes.

Another analyst also saw weather and money from funds as major factors in the pressure on soybean prices.

“Managed money and these big funds have been heavily long in the soybean market,” says Joe Vaclavik, founder and president of Standard Grain in Chicago. “I would imagine that more favorable conditions in South America have forced them to take some chips off the table.”

In contrast to the market doldrums, USDA reported  strong soybean exports Tuesday. More than 1.7 MMT of soybeans were inspected for export for the week ending on Dec. 15. Corn inspected for export totaled 769,008 MT, and 478,213 MT of wheat were inspected.

U.S. farmers continue to hold an enormous amount of 2016 crop in storage, according to Vaclavik.

"I think that the biggest problem that farmers have right now immediately, is what to do with this old crop corn. It’s ‘unpriced’; it’s ‘unhedged.' In the corn market, if you’ve got a favorable basis, go ahead and lock it in. Any short covering event ahead of the year’s end should be viewed as an opportunity.”

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