Record Brazilian trade surplus
– The July contract traded in a 84.6 cents range in the holiday shortened trading week. Tuesday saw the market down over 40 cents and it closed below the previous low that had provided support. This selling followed through into Wednesday where the market bottomed at 1270.6, just below the 100% fib extension before bouncing, forming a hammer candle stick. From here the market rallied into the weeks close to finish up 15.2 cents.
– Elliot Wave see no evidence that the recent recovery in prices is ending but that a decline below 1320 would change that.
– Brazil posted a record trade surplus in May of $11.4 billion as a surge in exports more than offset the recent fall in commodity prices. Soybeans saw a growth of 23% in exports while oil and sugar increased by 21.4% and 91.8% respectively.
– Brazil is set to export 120,000 tonnes to the US next month due to the cheap price of Brazilian beans. Back in 2021, 178,000 tonnes were imported into the US between May-June. This year, if further sales are made, US purchases could be the largest since 2014 when imports hit 1.05 million tonnes.
– Chinese soybean imports have died down despite the hype about the economy reopening there. Having seen a huge increase in imports during the first decade of the 2000s, demand has started to tail off slightly there. This comes at a pretty bad time considering the crop that Brazil has produced, and is going to produce in years to come. The result is that soy stocks are likely to reach an all time high in mid 2024. This is not bullish at all!
– The US crop appears to be in good health though in need of rains after a dry couple of weeks. According to forecasts it is going to be another week before many regions see rains which has raised the dryness concerns slightly.
– With El Niño likely to occur in the coming months, US farmers are hopeful of heavier rains to relieve some drought stricken areas. However, food producers across many parts of Asia have been hit by hot and dry weather with El Niño expected to reduce the impact of South Asia’s monsoon season. This will undoubtably reflect into lower production which will likely push food prices higher despite bigger crops in North and South America.
– The CFTC commitment of traders report from 30.05.23 showed that MM reduced both their long and short positions, by 7,324 and 3,708 respectively, leaving them net long 529 contracts.
– OR increased their long positions and reduced their shorts, leaving them 17,152 contracts long. NR added to their long and reduced their short positions meaning they are 28,458 contracts short.
Conclusion
We think the soybean market has found its bottom here for the time being but lower prices are still likely further along the line
Written by:
Jo Earlam
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