CBOT weekly outlook: Soybeans, corn watching weather

CBOT May 2017 soybeans, with 200-day moving average (simple) in orange. (Barchart.com)

CNS Canada — Soybean futures at the Chicago Board of Trade fell to their lowest levels of the past year on Tuesday, but bounced off of those lows as new-crop uncertainty and chart-based buying provided support.

The U.S. Department of Agriculture forecast larger-than-expected world and U.S. soybean ending stocks in its monthly supply/demand report, which prompted Tuesday’s drop in soybeans.

While large old-crop supplies and rising South American production prospects should continue to weigh on values, the uncertainty of the upcoming North American crop could keep some nearby support in the market.

“There appears to be a reluctance in getting short before planting and the growing season,” said Sean Lusk of Walsh Trading in Chicago.

While U.S. farmers intend to plant more soybeans this year, “it’s not what you plant, it’s what you grow,” he said, noting the futures will take direction from the day-to-day weather reports and resulting shifts in production prospects.

Production issues in Argentina also have the potential to provide some support.

While the large Brazilian crop and slowdown in Chinese demand remain bearish for beans overall, Lusk noted, the extent of the crop losses in Argentina due to excess moisture remains to be seen.

Corn futures will also watch the weather forecasts closely, with the possibility of seeding delays in the U.S. Midwest providing nearby support.

Speculators are already holding large net-short positions in corn, and appear reluctant to add to those positions, Lusk said.

“As we go forward the supply side will be unknown in the market, leaving weather to dictate the market direction.”

From a chart perspective, he said a weather scare could see new-crop corn futures climb back above US$4 per bushel, while the nearby May soybean contract is looking at an upside target of US$9.80 per bushel.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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