Soybeans Hold on to Strong Gains

Soybeans held strong gains, countering yesterday’s bearish crop report while corn and wheat were holding steady in limited trade. In outside markets, crude oil continued to add to its gains over the last two weeks pushing into the mid-$53 area while equities and the US dollar were weaker to start the day.

Yesterday’s crop report confirmed the big crops in South America. Brazil’s soy crop was pegged at 111 MMT, up from USDA’s March forecast of 108 and above industry acreage expectations of 109.9. Likewise, Brazil’s corn crop came in at 93.5, above expectations of 92.4 and 91.5, previously. In Argentina, USDA also was slightly above expectations with corn at 38.5 vs a trade estimate of 37.8 and soybeans at 56 vs expectations of 55.9.

Soybeans sold off initially after the report but spiked on it’s low of $9.41 basis for July. This should act as support in the near-term. Indicators are turning more positive after being oversold for some time, giving the market a short-covering temperament. To the upside, it will take a move into the $9.70 to $9.80 to likely push more shorts out. A resumption of the downtrend will take breaking through the $9.40 mark and eventually making a slide to $9. The fundamentals no-doubt support it.

In Europe, France and Germany are seeing above normal temps to help early season wheat development but conditions have turned dry of late which could spell problems if rain does not return. Weather patterns are expected to bring some light rains to Germany over the next two weeks, but hardly any precip is expected in France.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)

—Kevin McNew