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CBOT weekly outlook: Soybeans oversold

CBOT March 2020 soybeans with 20-, 50- and 100-day moving averages. (Barchart)

MarketsFarm — Sharp losses in Chicago Board of Trade soybeans over the past month are looking overdone, according to an analyst who expects the lows may be in for the time being.

March soybeans lost roughly 60 U.S. cents per bushel since the beginning of January, with the latest concerns over the coronavirus in China contributing to the declines.

Skepticism over just how many soybeans China will actually buy from the U.S. after the signing of the Phase One trade deal between the two countries also weighed on prices.

“I think the market is being super impatient, and I think it’s irrational to do so,” said Preston Zacharias of CHS Hedging’s Russell Consulting Group in Minnesota. He felt most of the selling pressure was tied to fund traders reacting to bearish headlines and soybeans were undervalued from a fundamental standpoint.

“My suspicion is that we’ll run out of gas to the downside, and eventually the Chinese will come in and have a program,” said Zacharias.

“We’re within a dime of serious support, and for the market to get through that it will take more than just bad headlines.”

While he was confident China would eventually come to the market and buy more U.S. soybeans, “it just maybe doesn’t have to happen today.”

Eventual Chinese demand would be supportive, but Brazil is in the early stages of harvesting its crop which may limit the upside potential as those supplies become available.

Weakness in the Brazilian real, which hit record lows relative to the U.S. dollar last week, also makes Brazilian soybeans more attractively priced compared to U.S. supplies, said Zacharias.

For the grains, Zacharias said corn was well priced given the balance sheet. Minneapolis and Kansas City wheat prices were also fairly priced, but fund buying had moved Chicago soft wheat into overbought territory.

— Phil Franz-Warkentin reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.



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