Soybean price will go down

I predict soybeans will fall again on reports that China canceled previous purchases as improved planting progress in South America boosted potential for record crops.

China, the world’s biggest soybean consumer, canceled 10 cargoes totaling 600,000 metric tons, Commerzbank AG said today in an e-mailed report, citing the country’s National Grain and Oils Information Center. Rain followed by dry, warm weather will aid planting and early crop development the next two weeks in parts of Brazil as dry weather eases flooding in Argentina for sowing, World Weather Inc. said in a report.

” ‘Reports of China canceling soybean imports put the market on the defensive,’Chad Henderson, the president of Prime Agricultural Commodities Inc. in Brookfield, Wisconsin, said in a telephone interview. ‘Right now, there are fewer worries about the potential for record crops in South America.’ ”

Soybean futures for January delivery dropped 1.3 percent to close at $13.8325 a bushel at 2 p.m. on the Chicago Board of Trade, after touching $13.7225, the lowest since June 22. And after a slight  rise last week, next week the price will continue to fall.

This week my equity increased from $39071.77 to $39584.47. The key point is the golden principle—“Buy Low Sell High”.

The form below shows the movement of my trading account during this week.

1. Why go long soybeans on Nov.16^th

The USDA’s November forecasts of the size of the 2012 U.S. corn and soybean crops were larger than expected, particularly for soybeans. As a result, the general downtrend in soybean prices since mid-September has accelerated, with January futures now at the lowest level since June 29.

Because of this news, last two weeks the price of  soybeans has experienced a big drop. So I thought   the speculator way to picking the bottom of falling markets.

2.  Why go long wheat on Nov.16^th

On Nov 15^th , there is a news that U.S. wheat feed and residual usage will reach 315 million bushels this year, far surpassing the 150 million-bushel average for the last 10 years. That means wheat for Livestock Feed Estimated to Rise Sharply. ( According to World Agricultural Supply and Demand Estimates (WASDE) referenced by Lisa Elliott, a commodity marketing specialist and assistant professor at South Dakota State University. )

So I went long on wheat expecting to pick the bottom of falling wheat markets too.

1. http://www.usda.gov/oce/commodity/wasde/   It is easy to find that many reporters expect future price based on this information. It is World Agricultural Supply and Demand Estimates (WASDE) report provides expected supply and demand for not only U.S. but also global crops and livestock. In addition to literature on price, this report gives statistic data published by USDA and other government agencies.  It is better idea of keeping eyes on the report, and use it when you trade.

2.”Trading Places”

The film tells the story of an upper class commodities broker and a homeless street hustler whose lives cross paths when they are unknowingly made part of an elaborate test of nature vs nurture by wealthy Duke brothers. It’s a great explanation of what we learnt in class.

The futures market reflects expectations that prices will continue to decline, especially into the 2013-14 marketing year.  The expected rebound in South American soybean production, Argentine corn production, and U.S. corn and soybean production in 2013 all contribute to the expectation of lower prices.  If those crops are as large as generally expected, prices will be even lower than currently reflected in the futures market. The USDA is forecasting record South American production of both crops.

“If planted acreage of corn in the U.S. in 2013 is at the same level as in 2012 and the U.S. average yield is near a trend value of 162.5 bushels, the crop would total 14.6 billion bushels, about 1.5 billion larger than the record crop and record consumption of the 2009-10 marketing year.  Similarly if soybean acreage is maintained at the 2012 level and the average yield is near the trend value of 43.8 bushels, the 2013 crop would reach 3.34 billion bushels, near the record levels of 2009 and 2010.  A combination of record, or near record South American and U.S. crops in 2013 would likely push prices down to or below the long term averages of about $4.75 for corn and $11.00 for soybeans.”(www.agprofessional.com )

On the supply side, the progress of the South American crops will be most important for the next three months.  Weather conditions are currently improving somewhat from early wet conditions in Argentina and dry conditions in central and western Brazil.  Some on-going dryness is noted in southern Brazil and Paraguay.

Prices will also be influenced by the on-going rate of consumption of the 2012 U.S. crops.  For corn, there is some anticipation that the pace of export activity, which has been extremely slow to date, may accelerate as South American supplies dwindle and Asian customers return to the U.S. market.

This week my equity increased from $33063.01 to $39071.77. Despite paying close attention to the market, technological analysis method helped a lot this time.

The form below shows the movement of my trading account during this week.

The crop trade market experienced a bearish time.  Based on the fundamental analysis, the USDA’s November forecasts of the size of the 2012 U.S. corn and soybean crops were larger than expected, particularly for soybeans.  As a result, the general downtrend in soybean prices since mid-September has accelerated, with January futures now at the lowest level since June 29.  Corn prices have moved into the lower half of the trading range that has been in place since mid-September and December futures are at the lowest level since September 28.  So far, prices seem to be following the classic pattern associated with small crops –peaking early in the marketing year and then declining as the year progresses.

Based on the technological analysis (given by Andrew’s lecture),from the graphs (decreasing triangles) below, we can also see the declining trend clearly.

1. Agprofessional:

http://www.agprofessional.com/

This is a very useful website for trader to view the latest news. In the “resource center”, there is several major crops’ information there, like corn, wheat and soybeans. It’s convenient for us to search related information for making decision.

And this website also has an interesting and useful part–”web poll”.  If you are not sure what other speculators are thinking, you can submit this questionnaire to see the statics.

2. Farm Futures:

http://farmfutures.com/main.aspx

i.e. Soybean Selling Threatens Bigger Break

(www.farmfutures.com/story.aspx/soybean-selling-threatens-bigger-break-17-64844 )

1. UNCTAD: data analysist

http://www.unctad.info/en/Trade-Analysis-Branch

The Trade Analysis Branch (TAB) of the Division on International Trade in Goods and Services, and Commodities undertakes policy-oriented analytical work aimed at improving the understanding of relevant and emerging issues in international trade.

2.Farmjournal

http://www.agweb.com/farmjournal/

This website has the latest news of the agriculture market. And the weather report on this website is very useful.

Good luck!

On Sept.4, Soybean prices reached a peak, the price of that contract declined to about $15.50 by the end of September and has been in a range of $14.86 to $15.74 since then. The price is currently in the lower half of that range.

The generally sideways pattern for soybean prices over the past month reflects conflicting fundamental factors. The most supportive factor has clearly been the very strong export pace. U.S. exports will be restricted to some extent this year due to the smaller supply.

On Nov. 9，USDA will release a new production forecast and a final estimate on January 11, 2013. On the other hand, the market anticipates a rebound in South American soybean production in 2013 that will provide ample supplies to support the increased pace of world consumption and to provide for exports of soybeans and soybean products to the U.S. if needed.

USDA currently forecasts 2013 South American production at a record 5.449 billion bushels, 1.212 billion larger than the 2012 harvest. That forecast will be updated monthly beginning on November 9.

The larger production expectation will be reflected by the lower price of soybean futures for the last half of the 2012-13 U.S. marketing year. Now, let’s wait for the Nov. 9^th report.

This week my equity increased from $ 28429.91 to $33063.01.

The main gain is due on my close interaction with the market.

The form below shows the movement of my trading account during this week.

1. Movement1 – Short on soybean (10.29.)

Last week soybean experienced a big increase. So I held the short contract expecting it will turn to decrease this week.

What enhanced my speculate is that there is a news saying on 29^th Oct, “Soybeans fell for a third session in Chicago as rains forecast for this week in South America may help improve growing conditions.” (http://www.businessweek.com/news/2012-10-28/corn-soybeans-decline-as-rains-may-boost-brazil-crop-prospects)According to my analysis, the market is looking at right now is the crop and planting conditions on Brazil and Argentina, so the rains forecast in Brazil may be pushing prices a bit lower.

As expected, the price of soybean plunged at the beginning of this week.

2. Movement2 – Long on soybean (10.31.)

A nice shot on 10.31.!

After 2 days’ falling, the price of soybean rises again. These days I paid close attention to the trade market. Considering the psychological activity of the speculators,  I offset the short contract and went long on the soybeans.