Planting seeds in field photo

Weather uncertainty still supportive for soybeans

U.S. weather uncertainty will continue to be a source of support for downtrodden soybean futures, regardless of rising South American production prospects, according to a U.S. analyst.

“There appears to be a reluctance in getting short before planting and the growing season,” said Sean Lusk of Walsh Trading in Chicago.

Chicago soybean futures actually fell to their lowest level of the past year earlier this week, but bounced off those lows as uncertainty about new-crop production and chart-based buying offered support. As the chart below shows, the May soybean contract fell heavily throughout March, dropping over US$1/bu before showing some mettle on Wednesday and early Thursday.

While U.S. farmers intend to plant a record-high acreage to soybeans this year, “it’s not what you plant, it’s what you grow,” Lusk said, noting that the futures will take direction from the day-to-day weather reports and resulting shifts in production prospects.

This week’s supply-demand update from the USDA offered little in the way of help for soybean prices, with estimated 2016-17 U.S. soybean ending stocks revised 10 million bu higher from last month to 445 million – more than twice the previous year’s 197 million. Meanwhile, global soybean ending stocks were also revised higher, mainly due to a combined 5-million tonne increase in soybean output for Brazil, Paraguay, Uruguay and Argentina.

Although the large Brazilian soybean crop and a slowdown in Chinese demand remain bearish for beans overall, Lusk said some support for the market may also come from concern about the extent of potential crop losses in Argentina, where heavy rain is causing flooding in some areas and delaying the soybean harvest.

From a chart perspective, he said the nearby May soybean contract is looking at an upside target of US$9.80/bu. The contract was trading up about a dime at around $9.58 near the noon hour on Thursday.

May soybean chart

Source: by DePutter Publishing Ltd.