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Could Ample Supply Pressures Drag Soybean Prices Down Further?

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Trend channel

January soybean futures prices were trading near the support level of 855 cents per bushel on November 16, 2015. The National Oilseed Processors Association’s (or NOPA) report of increased crushing supported soybean prices on the day.

Supportive technical buying and short covering after the NOPA report also supported soybean prices. However, the volume of soybean contracts declined by 6.8% on November 16, with a meager decline of 0.04% in open interest. It was the 13th consecutive day that the closing price was lower than the 20-day, 50-day, and 100-day moving averages.

With the completion of the harvest, logistics would drive soybean prices. Amid higher soybean production projections from South America, it might pose a competitive battle of commodities. With ample supply on hand, soybean futures prices might continue on a downward trend.

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Price drivers

A weaker-than-anticipated soybean crushing report put pressure on soybean prices. However, a substantial increase in crushing data supported domestic supply. Official harvest completion would reduce supply sentiment, as there would be lower supply-inducing reports from the United States. The consensus of analysts for higher inventories on the world balance sheet pushed soybean prices down further on November 16, 2015.

The focus is on South American weather progress, as it would induce the competitive supply sentiment. The reports of planting being completed 60% and production estimate of 100.2 million tons supported soybean prices on November 16, 2015. However, a stronger US dollar index by 0.59% also hindered export demand sentiment on the day.

Soybean prices could oscillate in the range of 845–860 cents per bushel in the short term.

Ticker discussion

On November 15, 2015, Martin Midstream Partners (MMLP) shares rose for the second consecutive day by 3.4%. Chemical & Mining Co. of Chile (SQM) and CVR Partners (UAN) also rose by 0.76% and 0.59%, respectively, on November 16, 2015, after two consecutive days of decline. Share prices of Enterprise Products Partners (EPD) rose continuously on the second trading day, by 3.7%, on November 16, 2015.

The Materials Select Sector SPDR ETF (XLB) rose 1.3% for the second trading day on November 16, 2015.

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