- Ben Williams
- January 16, 2023
- 4:57 pm
- 10 min read
Huge rally from Soy this week following Jan WASDE
Indices
Futures
Forex
– The Rosario Grains Exchange slashed 2022/23 harvest forecasts following the country’s worst drought in 60 years due to the La Niña phenomenon. Soy was cut from 49 million tonnes to 37 and corn was cut from 55 million tonnes to 45, both pretty substantial reductions. The Buenos Aires Grains Exchange have said the drought could be over by the end of March when El Nina begins, however this is not what is forecast. While the La Niña fading will no doubt help the situation, it doesn’t mean we will see El Niño conditions. Analysts suggest that the likelihood of El Niño occurring in 2023 Spring/Summer is low and if it does occur it’s effects are likely to be minimal.
– Speaking to people on the ground in Cordoba, Argentina, some showers were seen across the region on Thursday and the 14 day forecast shows more showers are on their way, however, rainfall amounts would still be around 40-60% of normal levels. That said, any rain that fall son Argentinian ground is going to help the soil condition for the 2023/24 crop.
– Brazil have been making sales to Argentina at a far larger amount than normal. Argentina’s stocks are low due to the ‘soy dollar’ causing an increase in exports and loss of domestic crop. So far they have sold over 300,000 tonnes, nearly half of the 657,000 tonnes that were exported to Argentina in 2018, the last big drought year.
– The January WASDE saw lots of movement across the South American figures. Brazilian bean crop was increased by 1 million tonnes to a 153 million tonne record crop, but the Argentinian crop was reduced by a massive 4 million tonnes due to the ongoing drought there, leaving their total crop figure at 43.9 million tonnes.
– The US production figure saw a reduction of 70 million bushels. When you couple this with the reduction in yield it lead to a reduction in ending stocks by 10 million bushels.
– The market reacted with a 25.4 cent close higher on these bullish figures.
– The CFTC commitment of traders report from 10.01.23 showed that Managed Money reduced their long positions by 9,127 and added to their short positions by 2,163. They now have a net long position of 131,704.
– OR added to their long position and reduced their short position and are net long 6,810. NR added to their long position and reduced their short position, they are net short 39,874 contracts.
– The March contract traded in a 59 cent range this week hitting the low of 1474 on Tuesday before rallying for the remainder of the week, mainly from Thursdays WASDE report. The market closed above the 78.6% retrace level on Thursday and then continued higher on Friday to what could prove to be a double top around the 1530 level.
– Elliot Wave are bearish beans unless we see the market break above that previous 1537.4 level. If they see the market back down at that 1500 level they say it would prove that the move up to this weeks high was a correction and that the market should continue to the downside.
Conclusion
The market may continue to trend in this upward trend channel but we expect it to encounter overhead resistance fairly soon which we think will be followed by a downward move. With Brazil still looking set for a record crop we are bearish this market.
Written by:
Ben Williams
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