The soybean market triggered fresh selling upon the release of Friday’s USDA Supply and Demand Report. Friday’s declines took the soybean market down to its lowest levels since August of last year. Putting this further into perspective, our short-term market momentum indicator is the most oversold since September of 2011. Finally, in spite of a decline of nearly 25% from the May highs, commercial traders are presenting their most aggressive buying since October of 2006. We’ve put these snippets together in chart form, here.
Crop Outlook
There is no doubt that this year’s crop, barring a catastrophe should be a record breaker which is a good thing. The world needs multiple record breaking years to build up any type of inventory to continue feeding the growing tastes of an Asian population that’s becoming accustomed to more variety and better food choices in their daily diets. Viewed in this macro context, it becomes clearer as to why the commercial long hedgers continue to buy this weakening market. Commercial traders have been net buyers in each of the last six weeks, adding another 20,000 contracts last week.
Key Levels To Watch
Given the market’s substantial decline and our unwillingness to reach out and catch a falling knife. The market must show some type of willingness to fight for itself before I’ll put any of my own money to work on the long side. Technically speaking, the market’s fall through $12.50 early this month, sets off a pattern that could push the bean market all the way to $10. I see this as a baited hook for those currently short. I highly doubt the market will trade this low prior to harvest. We’ll be watching for some type of bounce to establish a swing low for this decline and let the market make up its own mind.
