CBOT weekly outlook: Soy and corn recover, but too early to call a bottom

CBOT
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CNS Canada — Soybean and corn futures at the Chicago Board of Trade recovered off of contract lows over the past week, but it’s still too early to say either commodity has found a bottom.

“I’m looking for baby steps to confirm the bottom, and I haven’t seen anything of substance yet,” said Preston Zacharias, of CHS Hedging’s Russel Consulting Group.

For corn, he said the December contract had a key reversal day on July 12, setting new lows and then ending higher.

The session high that day of $3.6325 marks nearby resistance, which the contract has been unable to beat so far (all figures US$).

“It would take weather to make the market rally,” he said, adding that the fundamentals for corn are also somewhat tight, although the futures have yet to really take the declining stocks projections into account.

Looking at soybeans, “we’re in this conundrum where we don’t know exactly what demand will do,” said Zacharias.

While normally this time of year would see traders put a weather premium in the market, this year soybeans are dealing with “a demand risk discount,” he added.

The ongoing trade dispute with China may be cutting into demand from that major buyer, but “we’re getting some non-traditional customers come in and buy our bargain-basement soybeans,” he said, pointing to a recent purchase from Pakistan.

“We’ve reached a place where those customers are coming and knocking.”

U.S. corn is also facing its own export hurdles to Mexico and Canada but, like soybeans is finding new homes.

If the trade disputes find some resolution before U.S. midterm elections in the fall, the balance sheets for both soybeans and corn could tighten considerably.

“This thing could spin on a dime, but right now we’re not seeing it,” said Zacharias. “Exports are the key to watch in both of those markets.”

“A lot of traders will watch the export situation, especially on soybeans, to see if buyers start to come in and pick up U.S. beans at these cheap prices,” said Terry Reilly of Futures International in Chicago.

Reilly also pointed to an increase in non-traditional buyers for U.S. soybeans.

Weather concerns in parts of the U.S. Midwest could be cutting into the yield potential for both soybeans and corn, which should be friendly for prices.

November soybeans could potentially recover to US$8.75 per bushel, Reilly said, while December corn could move up to US$3.75.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow him at @PhilFW on Twitter.

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