Soybean bulls continue to talk about Argentine crushers buying U.S. soybeans and the fact Brazilian buyers might soon be in the market as well. Bulls are also pointing to a very large sale of 650,000 tons of U.S. soybeans to Mexico for 2018/19 delivery. Technically, we still remain in a longer-term downtrend, but bulls are pointing to the fact we have been able to climb back to $8.50 level and the worst may now be behind us.
Personally, I continue to believe we are range-bound in a sideways to lower market until some type of trade resolution with China can be negotiated. The market is simply breathing a bit and working its way back up towards the top of the range. To change my longer-term opinion, it would probably take a close back above $9.19 per bushel, which is still about +70 cents away, or a wave of extremely positive headlines surrounding Chinese trade. A widespread bullish weather headline out of Brazil would also be worthy of a reversal.
Right now, none of that is the case. In fact, it feels like U.S. and Chinese officials are the furthest apart we have been. As for Brazil, they are currently experiencing very cooperative early-weather conditions. Agribasil has their Brazilian export estimate up to 80 MMTs, which is well above the current USDA estimate that sits just below 75 MMTs. I should also note, Informa bumped their recent Brazilian production estimate higher to a record 122 MMTs vs. the current USDA estimate of 120.5 MMTs. Keep in mind, Brazil recently harvested a fresh all-time record crop just a few months back estimated to total 119.5 MMTs.
In Argentina, producers are expected to grow 53 to 54 MMTs of soybeans vs. just 35.1 MMTs last year. Here at home, it seems almost an absolute certain that we are going to harvest a record setting crop of our own. Net-net, record crop harvested in Brazil, record crop being harvested in the U.S., record crop being planted again in Brazil, and ongoing trade dispute with the worlds #1 buyer of soybeans. Just hard for me to get bulled up with the dark clouds overhead. Be careful not to fall into the trap of the "Gambler's Fallacy."
I personally battle it all of the time when trading. In elementary terms, it's thinking the market is going to bounce back or move in the opposite direction, simply because it's traveled too long in one direction. Perhaps the most famous example of the gambler's fallacy occurred in a game of roulette at the Monte Carlo Casino on Aug.18, 1913, when the ball fell in black 26 times in a row. This is obviously an extremely uncommon occurrence, with the probability just 1 in 66.6 million, but nonetheless it still happened.
Not surprisingly, when it finally ended it was followed by a long and abnormal streak of red... I'm hoping that eventually happens in the soybean market. When we are finally done with the trend of lower-highs and lower-lows, I hope it's followed by an extended run to the upside. I just don't think we are there as of yet...
The opinions of the author are not necessarily those of Corn+Soybean Digest or Farm Progress.