As I had decided after last week’s trade, I’d like to start looking at the market as a whole, and drawing connections between the different commodities. For this, I have summarized some supply and demand information as follows:
The U.S. Soybean harvest is about 41 percent complete whereas corn is 54 percent complete (1), which suggests that hedging behaviour will add pressure to the markets in the short run. Supplies of soybeans are currently bigger than expected (1) which is pointing to a greater supply of vegetable oils, thereby pulling down their price (2). Investment banks like Goldman Sachs are lowering their three- and six- month soybean price forecasts, and are expecting corn and wheat prices to “outperform” soybean prices over the next few months (1). The demand change this week was due to the lower price (due to higher supply) rather than something exogenous. So I will be looking for more demand information before making a trade next week.
I will be observing historical, monthly and weekly trends of soybeans before my next trade. Given what I know now though, I will likely be holding my short position for 2013 harvest-time contracts. I will also be studying the soybean market more closely for the effect of other commodities on its price.