CNS Canada — Soybean and corn futures at the Chicago Board of Trade (CBOT) have moved off their nearby lows in recent sessions, and should be due for some more strength in the short-term before seasonal harvest pressure kicks in.
The U.S. Department of Agriculture released relatively bearish production estimates on Friday, predicting larger-than-expected U.S. soybean and corn crops and ending stocks.
However, the subsequent reaction in the futures market was relatively bullish, with both commodities grinding higher.
The gains in soybeans are tied to increased demand from China, said analyst Sean Lusk of Walsh Trading in Chicago.
Demand, he said, has really picked up over the past month and was not included in the latest USDA projections. As a result, subsequent reports should show a tightening of ending stocks projections.
Issues in the Delta region of the U.S., where flooding is cutting into production prospects, were also underpinning the futures, he said.
Corn is not seeing the same supportive influences as soybeans, but was finding spillover support. While he didn’t think corn was oversold, Lusk said it was also due for a correction after trending lower since mid-June.
From a chart standpoint, November soybeans could see a 50 per cent retracement to the $10.33 per bushel level (all figures US$).
If that level is taken out, Lusk saw the next level of resistance at $10.70-$10.80, with prices that high likely bringing in more farmer selling.
For corn, producers are currently holding out for better prices before the harvest, which means any rallies will be sold into, according to Lusk.
While the general consensus appears to be for downward revisions to the USDA yield estimates, larger crops are still a possibility given the “tremendous ratings” being posted in Iowa and Illinois, he added.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.