Grain Spreads: Bean Pressure

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Commentary

Soybean selling was the focus again in the grain and oilseed complex again today. January soybeans fell 16 cents to $10.76, near the daily low, hit a six-week low and for the week were down 29 cents. January soybean meal closed up 40 cents at $302.50, near mid-range and on the week down $4.90. January bean oil lost 75 points to 50.07 cents, near the daily low, hit a two-week low and for the week were down 162 points.  Managed money poured into the soybean market in early October when President Trump spoke of his expectations of talking to Chinese President Xi at the APEC meeting in South Korea at the end of the month. He said that the two would talk, and that they would talk soybeans, and that China would buy. Managed funds held a net short position of -24,742 contracts on September 23 but flipped to a long position as it became more of a realization that President Trump would come to an agreement with China on Ag. The market could only estimate fund positions at the time due to the government shutdown. The CFTC has since released data up to November 10, when managed money held a net long position in soybeans totaling 203,476 contracts. A massive swing from short to long of over 230K contracts. The market though had gotten overbought in my opinion from amid a shutdown and uncertainties over the amount of China’s purchases. For the 25/26 crop year it was agrees that China would buy 12 million metric tons. Between China and Unknown Destinations, purchases are close to 7 million metric tons so far. Technically, the market may be targeting the gap at 1064 to 1070. If achieved I think it is a buy heading into the January crop report. The bean movement is classic buy the rumor and sell the fact. One thing in my view that we don’t know is how last year’s crop finished from USDA. Both corn and bean estimates are from September in the last WASDE. We will get a better understanding in the January report while the fear in my view will be that the crops get smaller on the next report.

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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