Specs book profits in soybeans, but trend still up overall

CNS Canada — Soybean futures at the Chicago Board of Trade moved higher during the week ended Wednesday, but profit-taking came forward to limit the advances.

And while more speculative long liquidation is possible in the short-term, the longer-range trend remains pointed higher, according to an analyst.

Soybeans had rallied in the lead up to the U.S. Department of Agriculture’s acreage and quarterly stocks reports, released Monday, and then saw some continued buying interest when the numbers came out as “somewhat bullish,” said analyst Tim Hannagan of Walsh Trading in Chicago.

Funds were “fat with profits” and were selling back some of those positions, he said.

The May contract ran into nearby psychological resistance at US$15 per bushel on Wednesday, but Hannagan expected the front-month contracts would hit US$16 before the end of May, given the tightening old-crop situation.

“The general long term is still higher,” he said, noting the U.S. has sold more soybeans than anticipated, which will leave the country with its second-tightest ending stocks in modern times.

Planted soybean area is forecast to be up by 4.9 million acres in 2014, which is bearish for new-crop pricing, he said. As a result, he expected to see more bull spreading in the market, with fund traders going long July and short November.

Old-crop prices will stay high in order to ration demand, while weather will become more important for new-crop contracts going forward.

For corn, the market has also seen a sizeable rally in recent months, leaving the door open to profit-taking, said Hannagan.

Demand is ahead of the year-ago pace, while supplies are also tightening, which should provide some support. However, the market has already gained over a dollar per bushel over the past couple of months, which may limit the upside potential.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

 

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