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Which market fundamental will finally allow for a soybean price breakout?

Naomi Blohm, senior market adviser

May 14, 2020

4 Min Read
market updates
monsitj / ThinkStock

For the past two weeks soybean futures have traded back and forth in a 30-cent trading range. Prices seem content to continue in this pattern for the short term until fresh fundamental news emerges to finally justify a price breakout.

This week’s USDA report had both bullish and bearish aspects in it, which continues to keep soybean prices in a modest trading range for now. Yet, a price breakout looks to be on the horizon. Here are three important indicators to watch in the short term:

1. Seasonals

Looking at 5-year and 15-year seasonal patterns for November soybean futures, two items stick out. The first is that during the first two weeks of May soybean prices often have a tendency to endure choppy sideways trade. (You can see it on the seasonal chart in the area highlighted in yellow.) This is the price pattern that is also occurring currently on the November 2020 daily chart.  

The second item that catches my attention is that on both the 5 and 15-year price patterns, soybean futures have a strong tendency to rally starting in late May.

2. Old crop ending stocks

On this week’s WASDE report USDA reduced 2019/20 soybean exports by 100 million bushels. This makes sense considering that Brazil has captured much of the export market to China in recent months because the Brazilian currency is at historic lows. This reduction in exports then allowed for U.S. 2019/20 ending stocks to increase by 100 million bushels, with ending stocks now up to 580 million bushels (or a 54 day supply) which is the second largest amount in the past decade. This large increase in ending stocks was somewhat already priced into the market, as trade was well aware that our U.S. exports were lagging overall.

Already looking ahead, the next monthly supply/demand from USDA will be released June 11. It will be interesting to see if exports increase or decrease in that report, and much will obviously depend on the export pace in the coming weeks. Also on that report, there may be a revision to 2019/20 production. This month USDA's National Agricultural Statistics Service (NASS) will contact survey respondents in North Dakota who had previously reported unharvested corn and/or soybean acreage (due to the extremely late harvest). If the newly collected data justifies any changes, NASS will update the Jan. 10 estimates in the June 11 Crop Production report.

3. New crop ending stocks

This is exciting! In Tuesday’s report, USDA projected new crop demand increased for both the crush as well as exports. Soybeans to be used for crush during the 2020/21 crop year are pegged to be at 2.13 billion bushels, up from 2.125 billion bushels this year.

Even more exciting is that te USDA feels that our soybean export market will be back with a vengeance next year with export use pegged at 2.05 billion bushels. Because of this, ending stocks are projected to be down to 405 million bushels.

What should really catch your eye is that with carryout of 405 million bushels, that equates to a 34-day supply! That means there can be no room for a weather issue this summer for soybeans. USDA is currently using trendline yield of 49.8 bushels per acre, and if the market at all anticipates lower yields, expect a price increase.

With nearly 60% of the  2020 bean crop yet to plant, and with multiple weather advisories now suggesting summer could turn warmer and dryer than expected, any sign of weather stress could spur soybean new crop futures up to $9.50 in a heartbeat. 

Reach Naomi Blohm: 800-334-9779 or follow her on Twitter @naomiblohm  or email her [email protected]

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author(s)

Naomi Blohm

senior market adviser, Total Farm Marketing by Stewart Peterson

Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.

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