CNS Canada — As soybeans climb the charts and help float other commodities such as canola, one market watcher says the prime selling opportunity for farmers could pass soon, as bearish factors come into play.
The president of Calgary-based ProMarket Communications, Errol Anderson, said large funds are the main force that has lifted Chicago soybeans well past the US$11 per bushel level.
“July soybeans broke US$11 (per bushel), which was significant in that it triggered a real strong technical buy signal to the fund managers,” he said, adding the price shot as high as US$11.69 in 18 hours.
“There’s some talk we could go as high as US$11.89… but this thing is extremely overbought,” he said.
Volatility is the name of the game right now but it also presents a good selling opportunity for the canola grower in Western Canada, he said.
In Alberta this week, canola farm pickup bids (off combine) were going for C$11.25 per bushel, according to Anderson.
“There’s big money to be made. Some guys are even looking a year forward on booking canola because of this,” he said.
A grains analyst from Chicago agrees funds are part of the reason soybeans have gone as high as they have.
However, Richard Feltes, vice-president of research at R.J. O’Brien, said media focus on the soybean and soymeal breakout has brought in a lot of global investor interest too.
“The chart action is drawing money in by historical standards,” he said.
The shortfall in Argentine production, weather forecasts calling for a transition from El Nino to La Nina and foreign currency matters are also behind the soybean rally, according to Feltes.
“I was told that it’s cheaper for the Brazilian crusher to import U.S. soybeans than for him to try and buy them from his own farmer,” he said, adding many farmers won’t sell any more beans in Brazil until they see how the summer U.S. weather pattern unfolds.
China also has a lot of soybeans it needs to buy, he said.
“We saw quite an increase in open interest soybeans this week; new money is flowing into the market,” said Feltes.
However, for Anderson, there are some worrisome signs cropping up that make him believe a peak may be near.
First and foremost was the weak U.S. jobs data for May.
The U.S. government revealed on Friday that just 38,000 positions were created, less than a quarter of what was expected.
“That could point the way down for large funds,” said Anderson. “Is it (jobs data) going to shake the fund manager? I realize it’s not part of agriculture, but it is part of the money flow.”
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.