March beans lost 22 cents for the week as month end profit taking emerged amid potential higher crop sizes in both Argentina and Brazil. Private forecasters from both South America and the U.S. have raised the Brazilian soybean crop up to 105 to 107 million metric tons from the 102-103 level the month prior. Brazil’s main producing state, Mato Grosso’s soybean harvest has advanced to 31 percent harvested compared to 16 percent last week and 14 percent last year. The harvest pace, which sits now at over double last year, may slowly erode thoughts of excessive rainfall on crop quality and potential harvest delays.
Private forecasters have also raised Argentinean production to anywhere between 53 to 55 million metric tons from just over 50 a few weeks prior. Argentinean soybean plantings have been reduced almost five percent in due to major flooding issues in mid January and as a result production losses look to be about 4 to 5 million metric tons lower than last year. Therefore the Brazilian harvest will be closely scrutinized by funds and speculators alike as soybean production gains there look to make up for the anticipated Argentinean losses. The near term weather outlook leans bearish as central and southern Argentina receive needed rains into the weekend while major growing areas of Brazil continue to see light rain and warm temperatures.
Trend- and Index-following Funds whose net long length in soybeans, soymeal, and soyoil came into the week long over 300K contracts and have not liquidated their sizable long positions. While they are still holding onto a weather premium, these longs will potentially start to get nervous especially in beans should no further major weather issues or harvest delays emerge. Demand from China has been lax since the frenzied buying pace from harvest up until the Christmas holiday. However on February 1, there was a flash sale announcement to China in the amount of 236K metric tons of beans with 170K of the total for 16/17 delivery. This sale to China had funds re-emerge as buyers mid-week fueling speculation that China will return as aggressive buyers of U.S. beans in February. China is expected to be back buying in the next few weeks following their Lunar New Year holiday for future coverage through March.
The question is where are they going to be securing future cargoes from? In my view South American weather will be paramount as to whether China bypasses the U.S. and secures cargoes in Brazil for future shipment or returns to the U.S. for export. Demand and weather will be the determinant as to funds add or liquidate their positions in the soy complex in the next few weeks.
Technical’s read like this for this week: For March soybeans support is down at 10.14 and with a close under 10.02 is next. Resistance is up at 10.41 and then 10.56. For March corn support comes in first at 3.57 and then 3.49. Resistance comes in at 3.71 and then 3.78. For March wheat support comes in at 4.16 and then 4.02 Resistance is up at 4.41 and then 4.52.