Soybean Market to Absorb Record Crop

September 11, 2018 9:55AM CDT

Big crops get bigger, that’s the old adage. North America looks to have another record size soybean crop for the 2018/2019 season, which follows last year’s record soybean crop. With that being said, you have to ask yourself, why have we added more acres of soybeans after last season’s huge crop? It’s simple really, it was due to very robust demand. In spite of the record size supplies there was strong demand to support prices above $9.00…easily. We knew very early in the season that soybeans won the battle for additional acres and yet the market for soybeans was supported above the $10.00 level. That was until the trade war with China began to look unavoidable. Soybean futures went from $10.50 to $8.26! I get it, China accounts for roughly 60% of US soybean exports. However, the global demand hasn’t changed. China will source their soybeans from South America…for the time being at least. Brazil may also have a record crop but it doesn’t have an adequate amount to supply China and all their other customers. The world needs our soybeans. China will eventually need our soybeans too.

It's hard for me to imagine that the soybean market can get more bearish than it already is, but I also know that it’s not just simple supply and demand fundamentals that move markets. It’s a big trend following funds. It’s fear and greed. It’s irrationality! Soybean prices may test levels near $8.00, but farmers won’t sell. They will hold out until end users are willing to pay up.

Soybean Nov '18 Daily Chart

Soybean Nov '18 Daily Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.