Commentary
Soybean futures have pulled back on a weakening meal contract in my opinion over the last few sessions. Both tied to the Argentina weather shift to cooler and wetter in my opinion. Soybeans posted sharp losses today before recovering on the close while spot soybean meal has dropped over 30 handles in the last four sessions. It is my belief that the recent losses come following a weekend of better-than-expected rains in previously dry areas of Argentina, with more rains possibly in the forecast. The weakness was amplified in the sizable, long position by trend and index following funds that had amassed in the soymeal market on the Argentine drought story. Export inspections this morning showed 66.3 million bushels of soybeans in the week ending January 19th. China took in 44.3 million bushels. This morning a flash sales announcement showed private exporters reported sold 192,000 metric tons of soybeans for delivery to unknown destinations during the 2022/2023 marketing year. Unknown is spelled CHINA by the way.
However, soybean shipments are expected to trend lower as new-crop Brazilian beans become increasingly available. Brazil continues to be active in the export market, but the US has seen an increase in interest for supplies as well highlighted by the strong inspection number this morning and sales for future shipment. The canary in the coal mine aside from weather in South America, continues to be the action in equities and the Dollar. The talking heads on TV and other market forecasters continue to lean dovish in my opinion regarding a slowdown in rate hikes. This comes as equities have rallied while pressuring the Dollar. Big two-day meeting by the Fed next week. Should they come in more hawkish than the Street expects, I would posit that equities fall while the Dollar rallies. Should this occur, I look for the sizable, long length in beans and meal to liquidate sending futures lower in my opinion.
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