Soybeans: is the commodity lagging about to bounce back?
It is the only one of the three major US agricultural markets that is in the red for the year. It has fallen nearly 20% from its May highs and prices have just hit their nine-month low.
Nothing has been going well lately for, at least from a bullish market perspective.
The future of the staple resource for soy milk, soy flour, soy protein, tofu, and many other non-food and retail products are down 5% year-on-year.
All graphics are courtesy of skcharting.com
By comparison, futures contracts, used primarily for making bread, noodles and crackers, are up more than 16% year-to-date.
Futures contracts, used to make starch, sweeteners and biofuels, gained more than 10% on the year.
Soybean also lags behind prices for both, which have risen 41% since the start of 2021. Soybean oil is largely up thanks to demand for biodiesel, which has tracked prices for both and gained 62% and 68% respectively.
The only component of the soy complex that lags behind soybeans is soybean meal, which is down 26% year-on-year due to tight demand from the Chinese pork industry and its revised guidelines for it. import of animal feed.
The problem with soybeans is essentially overproduction. “Soybean planting is 4 percent complete, double the pace of last year,” said Dan Hueber, author of The Hueber Report, a daily markets journal on US agriculture.
But after five straight months of losses and heading into what could be its sixth month in the red, is soy on the verge of a rebound?
The first-month soybean contract on the Chicago Board of Trade in November was heading into its second positive week in three on Tuesday, although the gain itself was marginal, at 0.1%.
Interestingly, in Tuesday’s session, November soybeans hit a nine-month low at $ 12.31 a bushel before settling up 1.3% to near $ 12.50.
It’s a sign of weakness ahead, said Sunil Kumar Dixit, chief technical strategist at skcharting.com.
“Soybeans were largely oversold with Stochastic Relative Strength Index readings of 0.5 / 0.4 on the weekly chart and 32/16 on the daily chart,” Dixit said.
“Prices have tested $ 12.31 and overselling the Stochastic is causing some rebound from the lows. However, unless prices close above the 50-week exponential moving average of $ 13.00 and of the 50 EMA on the daily chart, it is very likely that the median Bollinger Band of $ 11.84 on the monthly chart can be tested. Below is the 100 week SMA of $ 11.29, which may be a possible extension of the bearish momentum. ”
But beyond those levels a rebound was very possible, Dixit said.
“The long phase of distribution leading to the oversold state of the commodity may find support at the critical levels mentioned to regain the bullish movement. The resumption of the uptrend can be confirmed with a weekly close above the 50-EMA of $ 13.00. “
Disclaimer: Barani Krishnan uses a range of perspectives outside of his own to bring diversity to his analysis of any market. For neutrality, it sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.