Soybean Prices React to Weather and Supply Changes, Experts Debate Yield Estimates

Soybean prices climbed due to short covering and technical buying. The focus returned to weather, with concerns about an upcoming hot and dry pattern in the Midwest, potentially impacting soybean development and yield. This is particularly worrisome as the USDA already predicts a tight carryover. Brazil's August soybean exports are projected to increase, aided by strong demand from China, although the pace is expected to slow down from earlier in the year.

Changes in the US soybean supply and usage for 2023/24 include higher beginning stocks, decreased production and exports. Soybean production is forecasted to decline due to lower yields, while harvested area remains stable. The yield forecast was reduced, contributing to decreased supplies. As a result, soybean exports are expected to decrease, leading to a decline in ending stocks. The projected US season-average soybean price for 2023/24 is higher compared to the previous month. Global soybean exports were lowered due to reduced US exports.

As a result, the US Department of Agriculture caused a temporary spike in soybean prices by lowering projected crop sizes, but experts suggest on-ground reality might differ from the data. The USDA's cuts to yields were larger than expected, and while the soybean market was initially impacted, demand and export reductions offset yield declines.

While China's soybean stockpiling and increased demand from other regions were acknowledged, analysts were surprised by the USDA's further demand reduction in the recent report. Germany and Argentina have increased soybean purchases, but concerns arise over the sustainability of these dynamics. The US soybean supply could be underestimated, as changing planting trends might not be fully accounted for in acreage reports.

However, soybean prices rebounded, supported by a heatwave. Improved weather conditions led to a shift in market sentiment. Although temperature and other variables have a weak correlation with yield changes, soybean conditions saw a notable increase in the latest week. The direction of soybean yields from August to September often aligns with August rainfall patterns, indicating a potential for higher yield estimates next month.

As a result, weather concerns and supply projections influenced market sentiment. The USDA's yield adjustments sparked market fluctuations, and demand dynamics, particularly China's actions and increased purchases by other countries, played a role. The accuracy of yield estimates is debated, considering recent weather and planting trends. Consequently, the soybean price pattern may remain steady within a certain range and could experience a minor uptick in this timeframe. However, the potential for a significant upward trend in the medium term remains somewhat restricted.

Data for Technical Analysis (1H) CFD US Soybeans Futures - Nov 23 (ZSX3)

Resistance : 1328.90, 1330.85, 1334.00

Support : 1322.60, 1320.65, 1317.50                         

1H Outlook    

Source: Investing.com                              

Buy/Long 1 If the support at the price range 1317.60 - 1322.60 is touched, but the support at 1322.60 cannot be broken, the TP may be set around 1331.25 and the SL around 1314.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1328.90 - 1338.90, TP may be set around 1345.00 and SL around 1319.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1328.90 - 1338.90 is touched, but the resistance 1328.90 cannot be broken, the TP may be set around 1323.00 and the SL around 1341.00, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1317.60 - 1322.60, TP may be set around 1310.00 and SL around 1332.00, or up to the risk appetite.       

Pivot Points Aug 17, 2023 02:44AM GMT

Sources: Brownfield Ag News, Reuters