Soybeans Face Uncertainty Amid Tight Supply-Demand Balance

Soybean prices experienced mixed movements, mostly trending higher. The latest ratings show that 50% of soybeans in the United States are classified as good to excellent. This marks the lowest rating for this time of year since 2012. The month of August is crucial for soybeans, but given the lower-than-expected acreage, general improvements in weather conditions are necessary for the crop to reach its full potential.

The USDA reported that soybean export inspections were higher than the previous week but lower than the previous year, reflecting slow demand, largely attributed to Brazil's dominance in the market. The main destinations for soybean exports were Indonesia and Japan, with no significant shipments to China.

The USDA's reports on June 30th contained a bullish surprise for soybeans, as acreage was reported to be 4 million acres lower compared to the previous year. The acreage shifts occurred mainly in the United States, with farmers planting more corn at the expense of soybeans, particularly in the South.

Nonetheless, there has been a strong rally since the publication of those numbers, as market focus shifts toward demand rationing. The USDA's reduction in acreage and the lower-than-expected quarterly stocks indicate a much tighter supply-demand balance. Additionally, soybean prices are being influenced by weather conditions that could impact development, particularly with a long-range outlook leading up to August. This makes soybean prices more vulnerable to adverse weather conditions that could lead to crop deterioration and lower expected yields.

The United States Department of Agriculture (USDA) will release its next production estimate on July 12th, along with updated supply and demand tables for the US and global markets. It is anticipated that the new crop ending stocks projection will be revised lower following the recent data on planted areas. Brazil's trade ministry reported that soybean exports in May increased by 38.9% compared to the previous year, reaching nearly 14 million tons.

In the European Union, soybean imports during the 2022/23 season, which ended on June 30th, amounted to 13.02 million metric tons. This figure represents a 10% decrease compared to the 2021/22 season, where 14.54 million tons were imported. Despite a decline in volumes, Brazil remained the main supplier of soybeans to the EU, although the United States gained market shares in the bloc during the 2022/23 season.

Looking ahead, the lower ratings for soybeans in the United States, combined with reduced acreage, highlight the importance of favorable weather conditions to maximize crop potential. The USDA's reduction in acreage and lower quarterly stocks contribute to a tighter supply-demand balance, indicating the possibility of price increases. However, the decrease in soybean imports in the European Union, coupled with Brazil's continued dominance as the main supplier, may exert downward pressure on prices.

Data for Technical Analysis (5H) CFD US Soybeans Futures - Nov 23 (ZSX3)

Resistance : 1358.89, 1362.01, 1367.07

Support : 1348.77, 1345.65, 1340.59               

Source: Investing.com                              

Buy/Long 1 If the support at the price range 1338.77 - 1348.77 is touched, but the support at 1348.77 cannot be broken, the TP may be set around 1358.89 and the SL around 1333.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1358.89 - 1368.89, TP may be set around 1372.00 and SL around 1343.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1358.89 - 1368.89 is touched, but the resistance 1358.89 cannot be broken, the TP may be set around 1345.54 and the SL around 1373.00, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1338.77 - 1348.77, TP may be set around 1333.00 and SL around 1363.00, or up to the risk appetite.       

Pivot Points Jul 06, 2023 02:57AM GMT

Sources: Brownfield Ag News, Talk Business & Politics