CBOT soybeans poised to drop below US$10

(Lisa Guenther photo)

CNS Canada — The Chicago Board of Trade soybean futures market has dropped sharply during the week ended Wednesday, and is poised to fall even further.

“For March soybeans, I think it could potentially trade back to the US$9.45-$9.50 per bushel area,” said Terry Reilly of Futures International in Chicago (all figures US$).

A bearish fundamental situation, with record-large U.S. soybean supplies, and the upcoming South American soybean harvest, is likely to push prices lower, Reilly noted.

“Traders are starting to shift their focus back to South America,” he said. “Record (soybean) supplies are expected to be coming on line regardless of potential downgrades in the Brazilian and Argentine crops from unfavourable weather.”

Corn futures in the U.S. also dropped sharply during the week, with the declines linked to spillover pressure from the weakness in soybeans.

The liquidation of long positions by fund accounts added to the bearish tone.

Reilly said if the corn market breaks below the $3.75/bu. level in the March contract, they could drop down to the $3.40-$3.50/bu. area.

But the fundamental situation for corn isn’t as bearish as it is for soybeans.

A record-large U.S. corn crop was produced this year, but the state of the South American corn crop remains a “big unknown,” Reilly noted.

“The first crop corn out of Brazil should be fine, with the exception of localized flooded areas in the south,” he said. “But the second-crop corn is a little bit of a question mark because of the dryness in the northeast regions of the country, where corn may not be planted this year due to potential crop losses from drought conditions.

“We really won’t know the size of the Brazilian corn crop until producers are able to harvest their beans and get back into the fields and plant corn behind it.”

The next area of focus for corn and soybean traders will be 2015-16 acreage in the U.S. Early expectations call for soybean area to increase by about two million acres, and corn area to decrease by about 2.3 million, Reilly said.

“It might be a double whammy on the (soybean) market. We could potentially be seeing at record or new record supplies coming on line for 2015-16 for beans,” he added.

“For corn it’s a little bit supportive, but I do look for prices to decline in tangent with beans. But at some point for the soybean/corn ratio to start coming in a little bit for new crop.”

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

 

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