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Soybean Prices Rise above Crucial Support

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Soybean price trends

January soybean futures contracts were trading near the support of 875 cents per bushel on December 30, 2015. The second up day supported the sentiment that the directional change in prices was not a correction. The volume and open interest of the contracts dropped by 43.2% and 33.0%, respectively, before the first notice day of the contract. Prices were near the 20-day moving average of 879 cents each bushel.

The data in the chart above suggests that prices could stay in the range of 865 and 885 cents per bushel in the short run.

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Price drivers

IMEA’s (Mato Grosso Institute of Agricultural Economics) report of poorer-than-projected quality of crops in the key soybean-producing state dragged output sentiment from Brazil down. This supported US soybean export sentiment on December 30, 2015. Depreciation of the US dollar by 0.02% on December 30, 2015, supported soybean prices that day. In contrast, the projection of weakening export demand from China and stiff competition from Argentina’s inventories negatively affected soybean prices.

Stock review

A rise in the price of soybeans is a favorable indication for fertilizer companies, as their sales could rise with higher farm incomes. The performance of fertilizer businesses such as Martin Midstream Partners (MMLP) and Enterprise Products Partners (EPD) remained volatile on December 30, 2015, for the fourth consecutive day. Martin Midstream Partners rose by 1.3% and Enterprise Products Partners fell by 0.28%. SQM (SQM) continued to see upward price movements after a day’s decline, rising by 0.84%. CVR Partners (UAN) fell for the third consecutive day, by 0.89%. The Materials Select Sector SPDR ETF (XLB) fell by 0.93%.

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