RJO FuturesCast

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Agricultural

Soybean Market to Absorb Record Crop

Posted 09/11/2018 9:55AM CT | Frank J. Cholly

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

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Frank J. Cholly

Senior Market Strategist
Frank brings his clients more than twenty-six years of commodity futures experience. He was a member at the Chicago Board of Trade for 10 years where he filled orders in the grain and financial pits. Frank was also a Lind-Waldock's floor manager for ten years and later joined on as a commodities broker.
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