Soybean Rally Losing Momentum?

February 27, 2018 10:25AM CST

You know what they say about a bull market. A bull market needs to be fed a steady diet of “bullish” news. At this point and time Argentina continues to suffer from drought conditions and production will be negatively affected with losses of potentially 10 million tons off the USDA’s February forecast of 54 million tons. One forecaster is saying Argentina’s production could be as low as 40 million tons. So, two points that I want to stress here. Firstly, the worst case scenario is already priced in. Markets almost always over react. Secondly, forecasters always exaggerate the extent of the crop damage. Rain will come, and all will be well again.

I’m a chart guy. It’s usually a level on the chart that turns a market around or at least causes a market to lose its momentum. Yesterday’s trading action in the soybeans indicates a reversal. Today we need to see a confirmation of that reversal. Also keep in mind that if you’re a producer, you should be happy to sell your beans at $10.20 and higher. These are good levels for farmers to hedge their crop. On top of all that, you should expect more soybean acres this spring. There will not be a shortage of beans in my opinion.

Soybeans May '18 Daily Chart

soybeans_mar18_daily_chart

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