October 7, 2022


Skillful Business Crafters

Is the soybean market overbought, analyst asks

While the South American soybean crop is seen as too dry, the soybean complex is seen as overbought. 

With the slow volume of trade and an extreme technical overbought condition, the reversal yesterday might be enough to bring some short-term selling pressure. The two-week outlook for southern Brazil and Argentina still shows some scattered rains but mostly well below-normal precipitation.

Some traders believe this has already been priced into the market. The charts have shifted somewhat negative, perhaps because of profit-taking ahead of year-end. It is also possible that the markets see rain events in the intermediate forecast as threatening to the bulls,

After the impressive second-half December rally, banking profits has appeal. The mainstay of the bull camp has been dryness in Argentina. Growing areas there are expected to be dry today with showers a possibility on Thursday and Friday. However, temperatures appear to be above normal through Friday. Excessive rains from December 31 to January 6 may hamper the start of soybean harvesting in Mato Grosso. 

From the soybean oil perspective, Indonesia is expected to hit its 2021 biodiesel consumption target of 9.2 million kiloliters with the goal for 2022 at 10.1 million. Seeing additional palm oil consumed inside Indonesia should mean less edible oil supply for the rest of the world.

For the U.S. crush report next week, the average trade expectation calls for a November crush of 191.7 million bushels. U.S. soybean oil stocks on November 30 are expected to be near 2.391 billion pounds, up from 2.386 billion at the end of October. 

Market Ideas

We see the high forged yesterday as a temporary top, especially with funds turning sellers. A normal retracement of the second half of December rally would allow for a slide back to 1330 without disrupting the uptrend pattern. Resistance is at 1370. March meal resistance is at 409.10, with support at 389.60. March soybean oil support is at 55.76. 


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