CNS Canada — Soybean and corn futures at the Chicago Board of Trade trended down over the past two weeks, testing some contract lows in the process.
While the potential for a short-covering bounce is there, further losses are also a distinct possibility, depending on what happens in outside energy markets.
“Unless we see an improvement in the energy markets, (soybeans and corn) might continue to drift down a bit,” said Terry Reilly of Futures International in Chicago.
Traders are also awaiting the release of the U.S. Department of Agriculture’s quarterly stocks and world supply/demand reports on Tuesday (Jan. 12). “If we see big supplies, we’ll see new contract lows for many markets,” said Reilly.
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However, “if the USDA has any surprises to the upside, short-covering could easily add 20 to 40 cents (per bushel) in the beans, and anywhere from 10 to 30 cents in corn.”
Speculators are holding very large net short positions in both soybeans and corn, according to the latest Commitment of Traders data. While a bullish spark could see those positions quickly bought back, Reilly said there was also still plenty of room to the downside if the news remains bearish.
March soybeans had a downside target of US$8.25 per bushel, if enough bearish news lines up, while March corn could go as low as US$3.30 per bushel, he said.
Reilly said recent strength in the U.S. dollar and shipping issues along U.S. river systems were hindering exports, but major buyers were still showing steady interest.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.
