As mentioned in corn, as markets move into the month of December, brace yourself for false breakouts. On Thursday, the majority of soybean futures contracts closed at new contract lows or were at least testing them. And then on Friday, the market came in higher.
Fundamentally, cash prices are below the estimated average of the year. The price relationship for soybeans versus corn would favor soybeans finding a bottom soon. A little over a year ago, nearby soybean futures were trading at a $10.00 premium to nearby corn. That premium has now dropped to $5.50; the lowest it has been since 2007 was $4.50 in June of 2019.
It was only a year ago that many people were very hyped up over the future of renewable diesel. Some of the plants that were on the books to be built are still sitting there. The growth of the industry is not keeping up with loss of export demand. At the same time on the supply side, Brazil is outproducing us and, so far, the growing season there has been largely favorable. So, the near-term fundamentals are not good, but that is how market bottoms are made.
Technically, we believe the odds are very favorable that this was a fake breakout to the downside this week, and that soybean prices and soybean meal prices are all in the process of making bottoms. Soybean meal had a five-wave buy signal on November 18. Thus far, that low is still holding. Soybean oil prices have collapsed in the last two weeks and have now completed a 50% retracement of the bull market that started in August. This is an extremely volatile market. For those of you who are buyers of soybean oil, however, this is a level you should be picking up purchases.
Exports have picked up recently but, in the bigger picture, still look sluggish. It’s hard to imagine planted acreage this coming spring will increase much with prices below breakeven now for almost all producers. Prices are going to be choppy through the month of December. There will be better selling opportunities ahead.
Cash-only Marketers’ Strategy: Old-crop has been 50% sold for a long time. New-crop be patient.
Hedgers’ Strategy: Hedge profits are in the bank. We took a small loss this week on a short-term hedge. All we have currently is 30% sold in the cash market.
