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Soybean prices remain extremely volatile

TAGS: Soybeans

Soybean prices remain extremely volatile! The trade seems very uncertain about a number of big-ticket items: Do Argentina and Brazil have the current capacity to deliver on their commitments? Will the Brazilian Real continue to rally? Will the total number of planted acres here in the U.S. be +1 or +3 million higher after the upcoming USDA report? Will the transition to La Niña create a major weather hiccup in August for U.S. producers, and will it create a problem towards the end of 2016 for South American producers? Will Chinese buyers switch more purchases to U.S. suppliers? Do current U.S. exports and domestic crush estimates by the USDA need to be moved higher?

The list of questions could go on and on, but the bottom line is that the soybean market is extremely uncertain about a number of important headlines. From a trade perspective I have to imagine we will be seeing extremes swings in price during the next 60 days. In fact, a $2-3 per bushel swing in price would not surprise me.

In other words, I personally believe this market could trade anywhere between $10.20 and $13.20 per bushel between now and mid-August. If you are a producer who is questioning the condition of your crop, make certain you do not get yourself oversold. 

As a spec, I continue to look for a buy-side opportunity in the sub-$10.60 area, which currently seems like a bit of a downhill stretch, especially with the continued strength in the Brazilian currency, and talk of seeing the best crush margins inside China since February. I suspect, if the USDA delivers a bearish surprise in the July 1 report, we might start to take more aggressive steps in that direction. I'm of the belief that a bearish surprise will take an acreage number of 85 million or higher. There's also some fear that even with a higher than expected acreage number, the USDA could offset the news by releasing a lower than expected quarterly stock number on better demand for exports and domestic crush.

There's just lots of moving pieces right now, hence the extreme volatility. Make sure you have a game plan in place and one finger on the trigger if you're wanting to make any nearby moves in this market.


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