Market Commentary | October 6, 2022

Looking to the Futures

Soybeans Fall as Harvest Continues

Key Points

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The November Soybeans contract (SX22) has fallen 1.28% to 1365.75 in Wednesday’s late morning trading.  Soybeans had followed the broader market rally earlier this week, but Wednesday’s trading has them pulling back a bit as 22% of the soybean harvest in the US has been completed. 

The United States Department of Agriculture releases a weekly crop progress report during the growing season (April to November).  The report covers planting, fruiting, and harvesting progress throughout the growing season. 

The report this past Monday showed 22% of the harvest for soybeans has been completed which is slightly behind the 5-year average of 25% completion for this time of year.  There was a slower crop planting season this past April which has resulted in slightly slower harvesting this fall so far.

In the same USDA report, soybean crop condition was rated 46% good and 9% excellent which is unchanged for the last 3 weeks.

Low water levels in some of the most important rivers for shipping have started to cause issues with barge transportation of the crops.  The Mississippi River south of St. Louis has been dropping through the summer reaching critical levels in September.  The continuation of drier weather in the Great Lakes area has shown there does not appear to be any upcoming relief to the low water levels for the next few weeks at a minimum. 

The lower water levels can limit the amount of transport to the Gulf that can take place. Costs to transport freight via barge are at record highs for the month of October, and the slower barge traffic has impacted localized prices of soybeans due to the increased supply resulting from the reduced throughput of river transport towards the Gulf.

Planting is still in progress in South America, and the current outlooks for a very large crop this year have continued to keep downward pressure on the price of soybeans as South America has had very competitive pricing of their soybeans undercutting US business.

China, one of the largest importers of soybeans, made a big purchase of soybeans from Argentina a few weeks ago reportedly purchasing at least 60 oilseed cargoes with a total volume of at least 3.5 million tons.

Technicals

The trend from mid-September has seen SX22 drop from a high of 1488.25 on 9/12/2022 which was predicated on a large surprise drop in August yield numbers to its current price of 1365.75 close to its lows for the month which were around 1362 intraday.

The daily stochastics for the November contract bottomed out to a low of 36.86% for RSI last Friday, and after the rally the past few days, Wednesday has the RSI dropping back to 38.11% just above those lows.  These levels are not quite at the level they would be considered oversold which normally corresponds to a level before 30%.

The contract just had its 20-day SMA drop below the 100-day and may soon pass the 50-day SMA.  This type of crossover event is often considered a bearish indicator.  The contract has been trading below the 200-day SMA since 9/23/22.  Since the contract has begun that crossover the question arises if harvest conditions will remain as productive as expected or if we will see another surprise later this month regarding anticipated yields.

Our partners at Trading Central have their daily supports at 1362.75 and 1357.00 and resistances at 1389.25 and 1399.00.

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