CNS Canada — Chicago Board of Trade soybean contracts moved higher during the week ended Wednesday, but are running into upside resistance as a number of bearish factors overhang the market.
“Over the short term (soybeans) will be very choppy, but over the medium and long-term I’m still bearish,” said analyst Terry Reilly of Futures International in Chicago.
Demand for meal was driving the soy complex higher, he said, with speculative buy-stops adding to the nearby gains.
The fact that China has still only cancelled a small amount of previous U.S. soybean purchases has also underpinned U.S. futures, but Reilly said Chinese cancellations were inevitable and would be picking up over the next month.
From a technical standpoint, Reilly said a move to US$14.50 was possible in the May soybean contract, with more farmer selling likely coming forward at that point to weigh on values.
On the other side, “the downside is unlimited,” said Reilly. Investment funds are holding onto large long positions in soybeans, and if they decide to liquidate he said “prices could collapse to sub-$13 over the next month and a half.”
Corn futures chopped around within a narrow range during the past week, but managed to move higher in most months as spillover support from the advances in wheat and soybeans provided support.
“Corn is on the defensive, with any run-up in the market leading to wheat/corn spreading,” said Reilly.
Good end-user demand, from both exporters and the domestic ethanol sector, remains supportive for corn. However, farmer selling was said to be picking up on any attempts at moving prices higher as growers look to make some sales for cash flow needs ahead of the spring.
Corn traders will also continue to follow the news out of Ukraine closely, as the country is a major grain exporter and any disruptions to movement in the Black Sea would conceivably open the door for more U.S. export demand.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.