Soybeans see speculative selling and fall to new lows for the move on Wednesday on talk of China cancellations and improved weather in South America with more rain chances in Argentina.
Mark Schultz, Northstar Commodity, says the funds have been relentless and keep pushing the short side of the market. “Yes, that has been the pattern. We’ve had technical key reversals up and Tuesday went absolutely nowhere.” He says at least the March contract held the retest area around last week’s lows just above $11.79 but that chart area is key and needs to hold. “I will tell you if we start closing below those levels, I would say the next downside target on beans might be another $1.00 to $1.50 lower as there aren’t many support areas in between to stop it.” So, the $11.45 ¾ contract low from June 2023 is vulnerable.
“We aren’t going to win the battle on demand,” Schultz adds. As market chatter circulated that China washed out of some U.S. soybeans and switched to Argentina. Schultz says this is part of a larger trend of expanding acreage in South America and without a major weather problem there is no way to slow the trend down. “We potentially have 800 million bushels more production coming out of South America than a year ago.”
Lower soybeans and fund selling also push corn to new contract lows, plus the fast safrinha corn planting in Brazil weighed on the market. Schultz says, “What is a little bit disturbing is we are harvesting Brazil soybeans at a much faster pace which is allowing the safrinha corn or more of the corn to get planted in the optimum window. They’d like to have most of this corn planted between the last week in February to the first week in March to get some good yields.”
With March corn making new contract lows he says there is the potential to drop prices down to $4.10 per bushel. However, funds are holding a short position of 1.35 billion bushels which is near record short and with the right catalyst they could be forced to buy back those contracts which would produce a rally.
