Soybean prices continue to tumble and are now trading down to areas that I projected would provide more major support.
The question now becomes "Can psychological support between $9.75 and $10 per bushel hold during the massive wave of liquidation?"
Similar to corn, the weather forecasts are doing little to help support price, as they show more widespread timely rains into August. As well the recent renewed strength in the U.S. dollar and weakness in crude oil has flushed many of the bullish macro players from the trade.
Demand for soybeans have been strong, but there's some fairly good arguments that Chinese demand could taper in the weeks ahead as the Chinese auction off heavy doses of their domestic surplus.
In very elementary terms, there appears to be less interest in being a weather bull, less interest in being a macro commodity bull, and there's starting to be less interest in being a major soybean demand bull.
Hence prices have been moving lower as "bulls" from several key categories move to the sideline. I have to imagine based on the current balance sheet the fundamental "demand" bulls will soon start to find more interest in buying "value."
As a spectator, I'm starting to find more interest in being a buyer, but I would like to wait for another leg lower (perhaps the $9.70 to $9.80 area).
Keep in mind the U.S. soybean yield has moved higher in each of the past three-years from the September USDA report to the final report in January, so there's some fear inside the trade that production could move higher.
As a producer with a very large portion of my estimated new-crop production already priced, I need to simply stay patient and focus on production. I absolutely don't want to get myself oversold in this environment so I remain cautious in pricing any additional cash bushels until I know more about the weather in August.
In fact I recently bought back a small portion of my 2017 sales on the break and banked the profits. I still think there's additional room to the upside during the next six months, especially if weather either here at home or in South America become more uncertain.
As you can see below in the latest one-month outlook recently released by the NOAA, the top graphic still shows extreme heat. The bottom graphic shows above normal rainfall for many key producing areas.
In other words the "heat" is not getting that much bullish play, because there's plenty of rainfall in the forecast. I suspect if the rains don't come as forecasters are anticipating it could be a entirely different story and bean prices could take back off to the upside.