CBOT weekly outlook: Soybeans facing bearish headwinds

CNS Canada — All eyes in the agricultural commodity world are focused on the release of the U.S. Department of Agriculture’s next World Agriculture Supply and Demand Estimates report due out Thursday.

However, unless there’s a major surprise contained within the report, it’s hard to see the bias pointed higher for soybeans, according to an industry watcher.

“I think beans will go up three million acres (in the U.S., compared to last year) and corn will come down about the same,” said Sean Lusk, director of the commercial hedging division at Walsh Trading in Chicago.

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Production figures will also be an element closely watched by traders in the report.

Brazilian soybean production was pegged this week at 109 million tonnes by a private forecaster in South America, up from USDA’s previous prediction of 108 million.

Both estimates are up significantly from last year when Brazil produced 95.4 million tonnes.

Whether the agency hikes its estimate in Thursday’s report or not, the fact remains that is still a massive amount of soybeans flowing onto the market.

“Again, just looking at everything right now, you wonder about the value of beans,” said Lusk. “What will keep it up?”

Depending on what comes out of the report, funds may engage in a selloff and wait until U.S. planting season to buy back, he said.

“It’s getting to that time of year when funds won’t want to rebalance the books ahead of the U.S. planting and growing season.”

Other factors pressuring the market include a significant slowdown in Chinese buying since the start of the year, favourable South American weather and an excess of global ending stocks.

Corn, too, is facing headwinds. Mexico has backed away from heavy U.S. purchases, Lusk said, while U.S. supplies are still abundant.

“You have a lot of guys who are sitting on crops from years past that are still in the bin. They’re waiting to move them.”

That’s why corn rallies erode so quickly, he added. “Every producer sells on the rally.”

Many pundits believe U.S. farmers will plant soybeans en masse at the expense of corn.

That’s likely the case, Lusk said, but added that similar ideas were expressed last year and failed to materialize.

“That didn’t happen at all; we ended up with record corn acreage.”

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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