CBOT weekly outlook: Soybeans surge with USDA report

CNS Canada — Corn and soybean contracts on the Chicago Board of Trade both posted gains during the week ended Wednesday, and further advances are likely, according to an analyst.

Agricultural markets were sent into a flurry of activity Tuesday when the U.S. Department of Agriculture released a report that slashed the outlook for both U.S. and world soybean supplies.

The department pegged soy ending stocks at 400 million bushels in the U.S. in 2015-16 — significantly lower than the previous estimate of 445 million bushels. The estimate for 2016-17 was pegged at 305 million bushels, even steeper than the previous estimate of 412 million bushels.

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The agency also increased its estimate for soy exports.

“The U.S. garnered some unforeseen business from South America for both beans and corn, earlier in April,” said Sean Lusk, a co-director at the commercial hedging services division of Walsh Trading in Chicago.

The July soybean contract gained 44 cents on the week and briefly touched $10.91 per bushel on Tuesday (all figures US$).

“We’re a little overbought here technically. Funds got a lot of profit in here but look significantly long with markets,” he said.

Right now, Lusk said, the market seems to follow the adage “sell the rallies, buy the dips” because of the perceived tightness in soybean stocks.

“Any planting disruptions, any weather issues at all are going to keep this (soybean) market fed for some time moving forwards,” he said.

Some traders may even be looking for prices to slowly rise to the $11 a bushel mark before getting out, he said.

The corn market was much more muted in its rise, with the July contract essentially treading slightly higher over the course of a choppy week.

USDA predicted U.S. corn stocks would hit 2.15 billion bushels in 2016-17, slightly below most traders’ estimates.

Lusk said he feels both corn and soybeans could be headed for some choppy trade in the next while before regaining their momentum.

“They might get a little back and forth on the charts but right now all signs are going to point upward,” he said.

Some spreads are also technically overbought, which means the corn and soybean market should see some corrective breaks as well.

Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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