May Soybean futures appear to be ending the week, much as where they started, trading in a tight range between 1400.00 to the downside and 1450.00 to the upside on the daily chart, and currently trading at 1438.25 cents per bushel at the time of writing.
From a fundamental perspective, the primary driver for bearish sentiment for the commodity was the USDA report, released on the 8th March detailing the current supply and demand issues for soybean crops from the major growing regions. In this release the USDA failed to make any changes regarding US crops, with the 2012/2013 crop coming in at 125 million bushels against a trade forecast of 120 million and in line with the February forecast of 125 million bushels. The report only made minor changes to forecast crops from South America, with the final stock figures for global supply coming in at 60.21 million tonnes against the forecast in the previous month’s report of 60.12, marginally above trade forecasts at 59.45 million tonnes.
Moving to Brazil, again, the crop estimates here were unchanged at 83.5 million tonnes against a forecast expectation of 83.1 million tonnes, whilst Argentina’s production was pegged at 51.5 million tonnes down from the previous month at 51.5 tonnes with a trade forecast of 50.8 million tonnes.
From a technical perspective, the commodity continues to trade in the range defined by the green dotted lines on the daily chart, a consolidation phase that has now been in place since November last year. The key level is at 1482.50 cents per bushel, a price level that has now been tested on several occasions in the last few months, and following yesterday’s wide spread up candle, which pushed soybean prices higher by almost 30 cents per bushel, we now seem to be preparing for a run back to test this level once again.
At the time of writing it is hard to judge whether this level will be tested with any degree of momentum, as there are few clues in either the current or slower time frames. Volumes in both remain average, and over the last few weeks there has been no sustained buying or selling. The isolated pivot low of Tuesday, is providing some upwards support for the market currently, but this has happened previously, with the market then running out of steam as we approach the 1500 cents per bushel level.
As outlined above there is little in the fundamental news to provide a catalyst for a breakout from the current range, so the watch word here is patience for longer term trend traders in the commodity. If we do see a clean breach of this level, then the trend should build nicely, based on the solid platform of price support below, whilst a further failure, will simply confirm the strength of resistance in this area once again.
By Anna Coulling
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