Soybean rally excites the markets

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combining beans
Farm and Dairy file photo

The long weekend and continued weather problems in South America have contributed to a soybean rally that is still going. This Tuesday morning, Feb. 20, we made a new recent high, and we are getting close to the contract high made back in July.

All signs are that the prices are continuing strong on the Chicago Board of Trade. Soybean open interest increased Friday, Feb. 16.

This is the total of contracts that are in the market, and is an indication that new buyers are entering the market. Meanwhile, the corn speculators have bought back their record short spec position and are now slightly net long.

Positive mood

The spec funds are notoriously fickle, and can turn around at any minute. Still, they provide indication that the mood is for higher prices.

That mood will last until it doesn’t, of course. The current mood is predicated on the continued weather problems reported out of Argentina and Brazil.

The Argentines are too dry, the Brazilians are too wet. Too wet in Brazil means the current corn harvest is delayed.

They are at 15 percent instead of the normal 31. It was feared that this weather is also limiting planting of the second corn crop, the “safrina” crop.

That does not seem to be true at this point, as planting is actually at 46 percent versus an average 41 percent.

There are conflicting ideas about the size of the soybean crop. Wet weather was seen to slow harvest and hurt yields, but the Brazilians still expect a record crop of 115.6 mmt.

USDA is expecting 112 mmt, so there is quite a difference. Meanwhile, the Argentine crops are seen to be limited by dry conditions. It is the Argentine dryness that seems to be driving our prices higher.

Overnight going into Tuesday morning, we traded March futures at 10.39, which was a new recent high. That is the best price since the 10.44 3/4 of July 25, and is close to the contract high of 10.50-1/2 we had July 12.

We are currently at 10.35-3/4, up 14-1/4. What remains to be seen is if we can break the old high.

Critical time

Now is the critical time. We either push against the overhead resistance without breaking it, or we break out into new territory. Right now my bias is that we confirm the high, but don’t break it.

Cash grain traders are buying beans right now and taking targets. It will be a few days before we know if those targets were too optimistic.

Other crops. The corn markets are firm, following the beans. However, we have no real bull market in the corn.

Prices are still modest. Current March futures are trading 3.69-1/4, up 1 3/4 cents. The high this morning was 3.70, a new recent high. We were right here the end of September, and this is a good rally, since we were as low as 3.45-1/2 on Jan. 12.

It just is not a high price. The contract high was back in July at 4.22 1/4, and there is nothing in the market to suggest we are going anywhere near that again.

Wheat futures, driven by continued dry weather and weather forecasts for the Great Plains, are at the highest level in months. The new March futures high was made the 13th at 4.67-1/4.

We are currently trading 4.61. We have rallied from 4.13-1/4 in the middle of January. We are seeing sales opportunities. What few bushels we are growing may finally start seeing respectable prices.

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