Weekly Analysis

Soybean report – 19/09/2022

Demand shifts to Argentinian beans

Indices

Futures

Forex

– Argentinian sales have shot through the roof following the announcement of the government incentive to encourage exports and increase cashflow of dollars into the country. Farmers have sold 15% of the total crop in a week! Until last week, producers had been holding on to their soybeans more than usual due to the uncertainty surrounding Argentina’s economic situation with inflation is currently running at over 70%. As of Wednesday, 6.7 million tonnes had been sold from the 44 million tonne crop.
– The Chinese feed industry is said to have recovered notably during August although import levels are still well below where they were a year ago. It comes at a good time for the Argentinian producers as we have seen demand shift away from US soybeans and towards Argentinian. China are said to have purchased at least 20 cargoes for September/October delivery by Wednesday which equates to roughly 100-130 million bushels.
– All eyes are on South American weather at the moment with regards to the first part of the growing cycle. The Australian Bureau of Meteorology has announced that the La Niña weather phenomenon has formed for the third consecutive year in the pacific. This is the third time ever, since records began, that La Niña events have occurred for three years on the bounce. Typically, La Niña caused hot dry conditions in the growing regions in Argentina and southern Brazil with widespread drought likely. With forecasters predicting that conditions will return to a more neutral state by January/February we will be keeping a close eye on how the tail end of the La Niña affects yield and production figures.

– The September WASDE produced some bullish figures for the soybean market, most notably the US yield figure coming in below trade estimates and last months figure at 4,378 bushels/acre. Harvested area was also cut this month by 580,000 acres and unsurprisingly we saw a tightening of US ending stocks. South American figures were unchanged.

– The CFTC report from 13.09.22 saw Managed Money adding to their long position by a hefty 11,124 contracts and reducing their shorts by 1,374. This left them with a net long position of 112,127.
– OR added to their long and short positions, leaving them with a net short 13,522 contracts. NR added to their long and their short positions, they are net short 35,363.

– The November contract traded in a range of 106.4 with most the weekly strength coming on Monday as it gained 76.0 and closed well above the 61.8% retrace at 1488.2, the highest settle since 21st June. This was followed by further strength on Tuesday and the market doubled topped at the 1508 level before closing down for the remainder of the week, more than halving the weeks gains. After failing to close above the 1508 level we struggle to see how this market can go much higher in the near term, on a technical basis.
– Elliot Wave look to have changed their view point slightly, they are now expecting some near term strength for the remainder of the month before dropping to around 1200 by the end of the year.

Conclusion

We are hearing of more and more bullish fundamentals, which is likely to cause a bounce in the market. But with the current economic environment we are in, we think this downward move isn’t quite finished yet.

Written by:

Ben Williams

Ben Williams

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