Soybeans are trading substantially below the cost of production, and we just got a buy signal. The idea is that whenever a commodity is trading below the cost of production, less acreage will be planted; therefore, the supply-demand equation will shift and prices will rally. According to the latest government release, this year less soybean acreage will be planted than the last year. What’s motivating this shift is that many producers think that corn is a better bet than soybeans this year.
Soybeans have been trading below the cost of production for seven months in a tight price range, creating a bottoming formation. The current breakout to the upside is a good indication of a rally. This type of trading requires holding a position for a few months. If soybeans trade below 840, we will revise our thinking and bailout. We expect a rally to at least 967.
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