Fund liquidation pressures soybean market.

Soybeans were under pressure to begin the market week, as beans were trading over $15 in the nearby market and have now fallen back into the $13 range.

“We continue to see fund liquidation. We have seen the funds develop quite a long position here as we rallied nearby futures about three bucks here since the first of the year and now we’re seeing them liquidate that position pretty quickly,” said Aaron Curtis, commodity risk consultant with Mid-Co Commodities.

There are a number of reasons for that, including influences coming from outside markets.  For example, the crude oil market continues to be weaker, offering relief at the gas pump, but dragging down other commodities.

There are also continuing concerns about the economy in the European Union and China. China changed reserve requirements in the banking industry to spur their economy, which led to some liquidation in outside markets.

“Beans are one of the few things the funds have some profit in, so that’s what they’re liquidating,” said Curtis.  “Those kind of things… as far as anything fundamental on beans, nothing changed a while lot there.”

Concerns about the South American crop had offered some support up to this point as soybeans needed to buy some corn acres back, which seems to have happened.

USDA numbers for soybeans released on Thursday were somewhat expected.

“I think most people would probably agree that we’ve added a few bean acres back and at the end of June here we’ll probably see those bean acres go up a little bit.  Also expecting some increase in double crop bean acres.  It looks like the wheat crop is going to come off at a pretty fast pace here,” said Curtis.

A lot of beans will be planted this week and short term weather forecast looks favorable for crop development.

The corn market has been on the defensive since last Thursday’s USDA report.  USDA predicts a big increase in ending stocks for the next marketing year.  A projected yield of 166 bushels per acre may be somewhat aggressive according to Curtis, because much of the increased corn acres come from fringe areas that may not reach the highest yield ranges.

Nonetheless, that yield estimates translates into a 1.9 billion bushel ending stocks number that is nearly double the current one, pressuring corn markets. Cash markets continue to be tight with a strong basis, but producer selling is fairly light.

“Just not a lot of interest in these prices the last few weeks,” said Curtis.

Weather and crop progress will be main topics of discussion in the weeks ahead, as long as economic situations don’t become too overbearing.  Timely planting and good emergence provide a good foundation for the crop, but will continue to need timely rains and good weather to meet demand.  Market will be sensitive to any changes to weather and to outside markets.

“As we move into next year, 145-150 carryout is on the tight side compared to what we’ve seen historically the last few years,” said Curtis.

Volatility continues, especially with the start of expanded trading hours coming to the CME next week.

“More opportunities, I guess, to see some increased trading and obviously the CME Group wants to continue to be competitive and that’s what they think they need to do by continuing to add some hours to stay competitive,” said Curtis.

By: Carrie Muehling