Trouble Ahead for Soybeans and Meal

Traders had expected the drop in soybean demand in the USDA supply/demand report this week, but that was offset by lower yield than traders had anticipated. However, there appear to be significant factors in play that could hurt demand even further, and unless the weather is poor in Brazil or Argentina this coming season, the market would look vulnerable to more selling, especially if transportation issues continue to turn bearish.

The USDA report showed US 2022/23 soybean ending stocks at 200 million bushels versus an average expectation of 245 million. This was unchanged from the September report. Yield came in at 49.8 bushels/acre versus 50.6 expected and 50.5 in September. Exports were revised lower by 40 million bushels, and crush was revised higher by 10 million. Beginning stocks were revised higher as expected, but that was offset by the drop in production.

World soybean ending stocks came in at 100.52 million tonnes versus an average expectation of 99.7 million and 98.92 million in September. Brazilian production was revised up by 3 million tonnes to a new record high.

Palm oil futures have rallied since late September. Soybean oil has moved to a record premium over palm oil, and this has triggered much stronger than normal demand for palm. This could hurt soybean oil demand over the near term.

World Soybeans - Annual Production Change
Soybean Production - Top Exporters

While Mississippi barge traffic is moving again after dredging operations, the lack of significant rain in the forecast for the next two weeks suggests that low water issues may reemerge soon.

A large railroad union has rejected the tentative contract that was brokered by the White House last month. The American Farm Bureau Federation says there was a 19% rise in rail cars being filled with grains and shipped in the third quarter this year versus last year. There has been a big jump in the amount of grain shipments overdue for arrival, with nearly 80,000 cars being late by more than 11 days, up 1,800% from last year. A strike would be considered bearish, as it would cause backups in the country.

May Soybean resistance comes in at 1433 ¾ and 1465 ¼, with support at 1402 and 1377 ¾. If support gives way, 1300 and 1222 would become long-term downside targets.

Resistance for May Soybean Meal comes in at 405.90 and 410.30, with 392.80 as support. If that support gives way, 373.30 and 353.80 would become long-term downside targets.

Originally Posted October 14, 2022

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