Soybean futures are extending their losing streak on Tuesday, driven by rainfall in South America and end-of-month selling. Is this the beginning of much-awaited selloff, or is this a temporary blip on the radar?
January soybean futures shed $0.05, or 0.43%, to $11.635 per bushel to finish the session on the Chicago Board of Trade (CBoT). Soybean prices are coming off a November surge of more than 10%, lifting their year-to-date rally to nearly 22%.
Although analysts are concerned about the long-term trajectory of crop prices, market observers say that this is the time of the month that agricultural commodities experience a slump. Right now, investors are looking at a heavier-than-normal rainfall occurring in South America, which is beneficial for the harvest and would boost the harvest. They are also combing through data that suggest typical end-of-month selling, driven mostly by hedge funds and money managers.
According to the US Commodity Futures Trading Commission (CFTC), commodity funds are still maintaining noteworthy net long positions in soybean and corn contracts. Still, experts warn that there could be some bouts of long liquidations as 2020 comes to an end.
It has been suggested that the soybean rally could wrap up soon. This debate stemmed from a Reuters report that noted Chinese importers and processors are looking to complete their agreements with American and Brazilian exporters prematurely. The reason is that crush margins have turned negative due to ample inventories.
This is important news considering that China has accounted for more than 60% of shipments in the last five months.
Could a collapsing greenback support prices? The US Dollar Index, which gauges the greenback against a basket of currencies, plunged 0.68% to 91.24, from an opening of 91.95. The index plummeted 2.4% in November as it has plunged 5.3% year-to-date. A weaker buck is good for dollar-pegged commodities because it makes it cheaper for foreign investors to purchase.
In other agriculture markets, January corn futures tripped $0.0575, or 1.35%, to $4.2025 per pound. January wheat futures slumped $0.07, or 1.2%, to $5.78 a bushel. January coffee futures dipped $0.003, or 0.25%, to $1.1815 a pound.