Price action: Soybean futures started the week with strong gains of 20-plus cents. The March contract firmed 28 1/4 cents to $15.81 3/4, the highest close for a nearby contract since early June. Soymeal firmed roughly $8 to $10, with the March contract up $8.90 to $452.80. March soyoil slipped 20 points to 65.34 cents.
Fundamental analysis: Soybean futures surged on continued support from the two factors that have fueled recent strong gains – South American weather/crop concerns and strong fund buying. On the weather front, weekend rainfall was disappointing across areas of central and northern Argentina, Paraguay and southern Brazil. Forecasts signal mostly dry conditions will be seen across these areas the next 10 days to two weeks.
Funds were again active buyers in the soybean market, extending their net long position that grew to 172,822 futures and options contracts as of Feb. 1, the biggest since the week ended May 11. Since then, futures have rallied more than 50 cents, fueled by strong fund buying.
The buyer interest may slow and the market could face some corrective selling tomorrow as traders prepare for USDA’s Supply & Demand Report Wednesday. Traders are expecting a 40-million-bu. cut to USDA’s U.S. ending stocks forecast and reductions to production estimates for Brazil and Argentina. But the South American crop pegs will likely come in higher than private crop estimates, and the pre-report price surge will make it more difficult to get a bullish reaction.
Technical analysis: March soybean futures reached a contract high at $15.89 1/2. Next resistance is the psychological $16.00 mark, followed by the June 2021 high of $16.23 1/2 and the May 2021 high at $16.77 1/4 – both from the continuation chart. Today’s gap from $15.65 1/4 to $15.60 1/4 is initial support, followed by the 10-day moving average near $15.50 1/2.
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