CBOT weekly outlook: Soybeans trend up, but trade off headlines

CBOT
The Chicago Board of Trade building on May 28, 2018. (Harmantasdc/iStock Editorial/Getty Images)

CNS Canada — Speculative short-covering and optimism over trade with China helped soybean and corn futures at the Chicago Board of Trade move higher over the week ended Wednesday.

While additional gains are possible, both markets will take more short-term direction from the day-to-day headlines.

Conflicting headlines, tweets and other commentary lead to a choppy tone in the grains and oilseeds.

“The market is listening to all of it and trading it, which makes it really tough,” said Sean Lusk of Walsh Trading in Chicago. “So what do you do? You go back to the charts and you go back to the trend-lines. Let that be your map.”

Speculators holding large short positions, spurred on by positive rhetoric on the trade front, had the general technical trends pointed higher in soybeans, he said.

However, “it’s not a bull story fundamentally,” said Lusk on the current market in soybeans.

Large U.S. supplies and the relatively favourable South American crop prospects should limit the upside potential, he said.

As a result, he expected soybeans would run into resistance as they near $10 per bushel (all figures US$), “unless weather comes in and really plays with South American production.”

In addition, the recent strength in soybeans has not translated to the same gains in soymeal and soyoil. “If the products can’t move, why would beans move?” asked Lusk.

Soymeal would provide a good barometer for soybeans, he said, with March soymeal facing resistance at $330-$334 per short ton and support around $307.

“If you see meal falling apart, beans won’t push (higher),” said Lusk.

“For corn there’s a strong demand story, where dips are bought rather than rallies sold,” said Lusk. He said the solid export demand was surpassing the U.S. Department of Agriculture’s expectations.

Lusk expected old-crop corn futures would see more strength than new-crop values, as the South American corn harvest is still farther away, while early expectations are for U.S. farmers to be planting more corn next spring at the expense of soybeans.

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

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