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Can meal demand drive the soybean market higher?


Soybean bears think the USDA could reduce their domestic soybean crush estimate in today's data. In return, this would push U.S. ending stocks a bit higher. Even though weather in both Argentina and Brazil appears to have improved as of late, and the bears are arguing that late rains could significantly improve the finishing yields for soybeans, I'm not looking for the USDA to make any major adjustment to their current South American production estimates.

Technically we still appear to be stuck in a sideways channel between $8.50 and $9 per bushel. Many bearish technicians believe a close below $8.50 will set the trade for a more advanced test of sub-$8 prices. Without a bullish South American weather catalyst or increasing demand headlines from Chinese buyers, it will be tough to keep prices supported. We also have to keep in mind the bulls inside the trade will move beyond todays USDA report and immediately be staring at another hurdle just a couple of weeks down the road. 

The USDA's 2016 Ag Outlook Forum is Feb. 26 and 27, and most are suspecting to see an increase in both corn and soybean acres. Really the only bullish headlines I've seen floating around as of late is the fact that global soybean meal demand appears to be good and there's more talk that the trade might be overly discounting the price of the high protein, especially if Argentine crushers come up short supply and world buyers are forced back to the U.S. Stay tuned!


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