May 26, 2017
Soybean bulls have to be extremely nervous as the technical picture turns much darker. The recent close sub-$9.40 per bushel is the first time we've seen prices this low in several months and could open the door for more serious nearby short-side interest.
The bears are pointing to the fact recent rain delays for planting corn may push even more U.S. acres to soybeans. I've been saying for months that U.S. soybean acres in 2017 could end up north of +90 million and for the first time in our history end up larger than planted corn acres...here we are!
The bears are also thinking the USDA's current yield estimate of 48 bushels per acre vs. 52.1 bushels per acre last year is perhaps a bit too conservative, especially considering recharged soil moisture levels. We are also seeing more plentiful supply being made available out of South America.
It's also worth noting that geopolitical tensions are continuing to heat up in Brazil as the government has now deployed military troops to help control demonstrations because police forces are being overwhelmed by tens of thousands of protesters seeking current president Michael Temer's resignation and request for early elections. I've also heard reports and headlines that Brazilian police officers recently opened fire with live ammunition during clashes with protesters.
Bottom-line, the problems in Brazil seem to only be escalating and their currency may have to endure another leg lower in valuation, which nearby would bring bearish headwinds to the soybean market. Lets also keep in mind that crude oil prices were under heavy pressure yesterday and down over -5%, meaning the overall macro space is offering up very little help to the upside.
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