The soybean selloff continued unabated yesterday. The weakness started in the overnight market and accelerated throughout the day. The selling pressure seemed to come from all directions. Weather was getting a bearish spin as the dryer portions of Argentina are expected to receive two rounds of rain over the next 10 to 14 days while the excessively wet portions of the country get rain but nothing heavy.
Brazil forecasts are also considered beneficial. Fridays CFTC report was also viewed bearish as funds were bigger buyers of beans than anticipated, buying 45,000 contracts. This increased their net long to 176k contracts. This is the biggest net long bean position since late June. Funds also increased their positions in both meal and oil. A contact at RJO pointed out that from Jan 11 thru Jan 24 the funds bought 237,000 of grain contacts and walking in this morning every one of those contracts was underwater. No doubt some of these longs were running for the door throughout the trading day. The macro picture wasn’t any help today as both the equity and energy markets were under pressure as a risk off attitude hit these markets.
Traders don’t like uncertainty and that is what they are getting with the Trump administration as he seems to be issuing one executive order after another without thinking of the consequences. Price wise, Allendale is projecting that the July soybean futures will fall to $8.67 for the pre-summer low. We project that November futures have seen their highest price level they will see with the downside pegged at $8.84 before the summer rally. Allendale is clearly a bear for mid-term pricing.
We strongly advise moving all old crop soybeans and getting new crop sales on the books, now.
Friday's COT report showed that funds had bought more than 70,000 contracts, which was enough to completely cover their short positions and are now "flat." Officially, funds are reported as long 21,000 contracts but by their scale it is best to consider that position flat. This news helped add to selling today as trade took this as an open chance for selling without concern that funds would be around today buying.
Trade knew to expect buying to get back to a flat position but is not going to assume funds will start building a long position anytime soon. Spill over pressure was seen from beans today, which also helped add to the selling today. Total traded volume would best be described as "moderate" today which gives the impression today only saw light selling and spill over pressure from beans, not many buyers around with the funds on the sidelines. This recent pullback in March has yet to find a single level where large-scale support has been found.
Chart support would be expected near the six-month uptrend line, which crossed today at 351-1/2 but has yet to be tested. Going forward we should expect much larger technical support near the uptrend line but for now we might want to hold off expecting any bounces back to 371 if funds are going to remain on the sidelines. Keep in mind it took a week of buying 70,000 contracts from funds to post that high price, it would be tough to expect trade to do that without fund assistance unless major bullish news is seen.
• Larger technical support should be expected the closer that corn pulls back close to 351-1/2
• As it has already done we should expect strong demand news to continue offering support to corn and limit moves lower
• If funds can be seen buying again it would quickly give the impression they are starting to build a new long position which could give longer term support from that group
• Beans still have more downside chart room to continue offering spill over pressure to the corn market
• Sellers feel more confident that funds will remain on the sidelines which allows for more aggressive selling than we have recently seen
• Bears should be cautious expecting an breakout lower on the charts unless demand begins to show signs of slowing