I went short two contracts of soybeans this week, and realized gains of $450 on each contract. All grains ended lower this week pressured by the appreciating US dollar. November soybeans ended 31 cents lower on Friday, which is the day in which I made my trade.
Soybeans were tricky to trade in this week, because there were in effect, two opposing forces at play. Firstly, Argentina has had three times the normal rain than usual this month, which means that 45% of their soybeans fields are excessively wet (1). On the other hand, about 30% of Brazil has been too dry for planting (1). This expectation of tightening supplies had an aggregate effect of pushing up soy prices early in the week.
That said though, after continued price rise, “speculative-profit taking” (2) or pulling out of the commodities can somewhat be expected as long traders lock in their profits from the rises in price. When lots of traders pull out in this way, prices can drop quite sharply. I did not predict that this will happen on Friday, but I had gone short on soybeans for another reason: the expectation of an appreciating US dollar ahead of the US elections. Ultimately, I think it was both of these factors that played a role in pulling down the price of soybeans, and I made some profits as a result.