March soybeans closed sharply lower yesterday with an outside day down. An early rally pushed the market to its highest level since June 13, but a combination of a wetter forecast for Argentina and a drier forecast for central Brazil helped spark aggressive selling.
For the next several days, temperatures in key growing areas of Argentina are expected to be the 100s with dry conditions prevailing until a cold front brings cooler weather and half an inch of rain.
Crops are under stress, so more damage is likely in the next couple of days, but traders are counting on good rains over the next 10 days. Dry weather in the forecast for Brazil could ease excess moisture concerns there and increase the harvest pace.
China plans to further boost production to trim its dependence on imports from countries such as Brazil and the U.S. The government plans to increase planting area this year by 6% from 2022. Acreage expanded almost 22% last year.
With the drought conditions in Argentina and high meal prices, traders expect India’s meal exports to more than double in 2022/23.
Commercial traders indicate there are at least two vessels of Brazilian soybeans headed to Argentina in the coming weeks. Even with significant losses for the Argentine crop, there could be plentiful supplies around the world if the Brazilian crop is strong.
March soybean meal closed lower yesterday after posting a new contract high, and this key reversal is a bearish technical development.
Outside market forces lent support early yesterday but pressured the market late in the session.
Short-term supply tightness supported the nearby contracts, but traders remain less concerned about availability once the Brazilian crop is harvested.
Talk of an improved economy in China has helped provide some underlying support.
MARKET IDEAS:
March soybean resistance is at 1,537, with 1,480 3⁄4
as initial key support. March meal resistance is at 480.4, with support at 465.2 and 460.1. March soybean oil resistance is at 66 with support at 63.
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About the Author: Terry Roggensack, a founding principal of The Hightower Report, analyzes the livestock, grain and soft markets. Roggensack has over 30 years of experience in the commodity and financial futures industry. In the late 1980s, he briefly lived in London as acting director of a new London clearing firm. Prior to that, Roggensack was director of research at Stotler & Company.
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