Opportunities in Ags: Soybeans
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March Soybeans rallied $1.41 in just 10 trading sessions, as traders saw the need for a premium just in case South American weather stayed dry into January. The short-term forecast is dry, but there are some scattered rains beginning to develop for southern Brazil and northern Argentina. With the market’s extremely overbought condition and the recent drop in export sales to China, soybeans are likely to see a significant downside correction if the South American weather is normal.
US ending stocks for 2021/22 are expected to reach 340 million bushels, up from 256 million last year. Many traders think they could come in at 350 million or more. World ending stocks are expected to reach their second highest level ever.
With palm oil, rapeseed oil and sunoil production all on the rise in 2022, traders will not be able to count on tightness in those vegetable oils to lift soybean (and soybean oil) demand.
It should not take much in the way of a wetter forecast to spark significant long liquidation selling for meal and soybeans after the recent surge. The market looks vulnerable to at least a technical correction.
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