Views on commodities and energy
U.S. Soybeans in focus, with weather
The bearish sentiment that took over Chicago Board of Trade grain markets last week may continue in coming days, especially if nearly ideal greenhouse conditions continue to help maturing crops in the Midwest.
Confirmation by the U.S. Department of Agriculture of bumper corn and soybean harvests coming this autumn sent grain prices lower last week. But new export interest by China for soybeans or slide in the dollar could still buoy prices.
Soybeans will grab the spotlight when the markets open on Sunday night after a huge dive on Friday as the CBOT August soybean contract expired 87-1/4 cents lower — or 7.4 percent — at $11, a two-week low.
Disappointing monthly domestic soybean crush numbers along with big, unexpected last-minute deliveries against the August soy contract — a signal that some companies had secured enough cash beans for now before harvest — triggered the selling.
“Beans are the market to be tracking the next few days. They remain the most jittery and lively all the grains,” said Gavin Maguire, an analyst with brokerage EHedger. “But they also have reached a very critical technical point. If we open lower (this) week, essentially the charts will have etched out a very bearish pattern.
However, if new-crop soybeans can hold chart support that “leaves the upside for another run,” he added.
Now that August soy contract has expired, traders will watch new-crop November beans for buy/sell signals. Key support in that contract, always the main “harvest” delivery each year, is seen at $9.80, a level penetrated late Friday. November closed just above that point at $9.81-1/2, down 37-1/4 cents.
Given the price break, new sales to China of U.S. soybeans would provide support. Driven by China’s huge appetite, U.S. soy export sales with more than three weeks left in the season was already 104 percent of USDA’s forecast.
HOT AS ALWAYS, BUT RAINS EXPECTED
The weather remains the wild card that can always rattle traders, but the most recent forecasts late Friday indicated plenty of rain and heat across the U.S. Midwest — ideal conditions to promote corn and soybean growth and yields.
“We have to make sure this rain event develops as forecast, especially in the central and eastern Corn Belt next week — filling in the dry spots,” said analyst Dan Cekander at brokerage Newedge USA.
Dry pockets being watched include southern Minnesota, northern Iowa and northwestern Ohio. But most of the Midwest has had more than enough moisture to enhance crop development following the coolest, wettest July in years. Corn went through pollination last month under perfect conditions, the main reason the USDA boosted its corn yield estimate by six bushels per acre to 159.5, just under the record of 160.3 bpa.
As CBOT traders say: big crops get bigger. So if August weather is as nice as July was, the U.S. corn crop — now forecast as the second-largest in history at 12.76 billion bushels — may get even larger. Importers are quite aware of that. For soybeans, U.S. output is already projected to be the largest on record at 3.199 billion bushels. Soy would benefit even more than corn from rains in August, since beans fill pods out this month and mature a little later than Midwest corn.
The annual Pro Farmer Midwest Crop Tour begins on Monday, giving traders another read on the U.S. corn and soybean harvest. USDA data last week was based on Aug. 1 conditions. Crop scouts this week will inspect and sample fields from Ohio to South Dakota and estimate final yields on Friday.
Lastly, while fundamentals usually dominate the price action in grains during the U.S. growing season, sharp moves in the dollar, equities and oil — all indicators of the health of the economy — will also continue to factor into grains.
“They are still important because you have some people who trade commodities according to what those outside factors are doing,” Cekander said.