(Resource News International) — The downturn seen in CBOT soybean and corn futures over the past couple of weeks could be expected to continue, as the path of least resistance remains lower in both commodities, according to analysts.
“The South American crop outlook is indicating a huge increase in (soybean) production — 30 million tons-plus from last year,” said Mario Balletto, an oilseeds analyst with Citigroup in Chicago. “That will be increasingly coming into the market in the months ahead,” which will lead to a shift in demand away from the U.S. toward South America.
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While global soybean supplies are rising, the demand has been softening, said Balletto. He noted China is backing away from the market and could be reducing its imports.
Expectations for an increase in U.S. soybean acres in the spring will also serve to limit the upside in the market, said Balletto. “Soybeans don’t need to compete for acres, because the outlook for next year is pointing to a burdensome supply situation.”
From a technical standpoint, Balletto said, the March soybean contract was currently sitting near trendline support levels, “which, if taken out, would be bearish from a technical standpoint.”
On the other side, he said. a short-covering bounce was possible, which could lend some short-term support to values. Movements in the outside financial markets could also lend some support to prices.
Terry Reilly, a grains analyst with Citigroup in Chicago, said corn was also trending down, and could eventually move to the US$3.30 per bushel area, given the poor export movement and the large supplies.
Reilly said expectations for only modest increases in feed demand won’t be enough to offset the record U.S. soybean supply situation. “There is still the potential that we’ll see corn ending stocks well over 1.5 billion bushels.”
Large South American corn crop estimates are another bearish influence overhanging the market. “If U.S. corn remains uncompetitive with South America, that will really take away export share,” said Reilly.
Expectations for increased U.S. corn acres, due to the lower winter wheat acres that went in the ground, will also keep prices under pressure.
Reilly said small short-covering bounces were possible, but he expected the US$4 per bushel level would remain a firm resistance level on the upside.
