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By Karen Braun
NAPERVILLE, Illinois, March 22 (Reuters) – Traders have sold off Chicago soybeans this month in spectacular fashion as economic concerns mount and Brazil’s bumper harvest hits the market.
However, U.S. farmers have not yet begun planting their next crop, and the domestic supply situation is not exactly comfortable with stocks relative to use set for nine-year lows by September.
Most-active CBOT soybeans Sv1 on Wednesday fell to their lowest level since early December, ending nearly 6% off this month’s high. New-crop November SX3 beans fared worse, settling at $12.72-1/2 per bushel, more than 8% below the month’s high.
Selling in November soybeans gained steam on Wednesday, diving deeply into oversold territory as the relative strength index, a key technical indicator, dropped below 20. Values of 30 or below typically suggest oversold conditions, and sub-20 had not been seen in new-crop beans since the first days of the pandemic in 2020.
New-crop soybeans have lost 5.5% so far this month and could be shaping up for their worst March since 2008, when the contract plunged 24% amid a worsening financial crisis. From there, soybeans surged 50% by July 2008 but went off the board at considerably lower levels.
Banking sector turmoil, inflation and geopolitical conflicts have all recently spooked commodity investors, but outside markets may not be to blame for this week’s downturn in grains and oilseeds, especially soybeans.
Crude oil futures have rallied so far this week, and U.S. equities had also been gaining until the U.S. Federal Reserve late in Wednesday’s session announced a largely expected interest rate hike.
However, global vegetable oils and oilseeds have been hammered, this week hitting multi-month and multi-year lows. So far in March, European rapeseed futures COMK3 are down 19%, Canadian canola RSK3 has fallen 12% and benchmark Malaysian palm oil futures FCPOc3 have shed more than 11%.
As of March 14, money managers forged their first net bearish position in CBOT corn futures and options since August 2020 following a record three-week sell-off. But they were still decently bullish in beans with a net long of 127,661 contracts and a relatively light book of outright short positions.
Funds may have turned their selling focus to soybeans in the days since. Money managers’ biggest weekly dumping of CBOT soy futures and options was about 61,400 contracts in November 2019, requiring double the weekly record for funds to be flat by the next report.
Net selling in corn recently blew out a weekly record at more than 147,000 contracts in the last week of February, well past the prior high near 104,000.
Despite catastrophic crop problems in Argentina, Brazil’s enormous harvest and equally enormous export program have recently weighed on the soybean market. However, the potential size of the 2023 U.S. soybean crop remains up for debate with farmers’ planting plans not yet known.
The U.S. planting intentions report, due next Friday, frequently catches the market off guard. Soybean acres surprising to the low side of trade guesses is statistically most probable, having occurred in seven of the last 10 years. Reuters plans to publish pre-report trade estimates on Monday.
Karen Braun is a market analyst for Reuters. Views expressed above are her own.
Graphic- CBOT November soybean futureshttps://tmsnrt.rs/42wTQvK
Graphic- CBOT November soybean futures, 2023 vs 2008https://tmsnrt.rs/3n4fIye
(Writing by Karen Braun Editing by Matthew Lewis)
((karen.braun@thomsonreuters.com; Twitter: @kannbwx))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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