NAPERVILLE, Illinois, Jan 8 (Reuters) - Historic dryness in Brazil’s top soybean state supported Chicago soybean futures late last year, but rains have started to return, and speculators have been in selling mode across the entire soybean complex for a few weeks now.
Most-active CBOT soybean futures on Monday bottomed at $12.36 per bushel, the lowest level since December 2021. Monday’s settle of $12.45-1/2 represents a 10% downturn since futures’ recent peak in mid-November, and it is the lowest price for the date in four years.
Soybeans have shed 4% in the first five sessions of 2024, their steepest such decline since 1984, when the United States was responsible for nearly 80% of all global soybean exports. That share is now below 30%.
Soybeans had rallied sharply in 1983 amid significant U.S. drought, though that may be the only useful comparison with this year given how greatly market dynamics have shifted since then.
U.S. drought was of concern in 2023 and caused multiple mid-year rallies, but soybean futures eased almost 15% last year, their first yearly loss since 2018. That was partly motivated by the expectation for a rebound in South American soybean supplies in early 2024.
Top bean exporter Brazil’s upcoming crop will be smaller than originally expected, but recent rains have steadied the industry estimates for now as the volume is still seen meeting global demand, particularly with a significant comeback in Argentina.
Soybean futures’ ominous start to 2024 may not set the tone for the month, as soybeans have climbed throughout January in seven of the last 10 years. January 2014 losses were minor, but speculative selling was prominent in both 2015 and 2020, causing larger declines.
Futures fell sharply throughout January 1984, but beans finished higher in each of the following two months.
FUND SELLING
In the week ended Jan. 2, money managers established their most bearish view in CBOT soybean futures and options since March 2020, flipping to a net short of 11,629 contracts from a net long of 4,767 a week earlier. Funds were briefly net short beans during one week in October but have otherwise held bullish views since early 2020.
Money managers have cut down their formerly massive net long in CBOT soybean meal by nearly 70% since late November with a record-large selling streak. Their Jan. 2 net long of 43,039 futures and options contracts compares with 59,233 in the prior week and 135,798 at the end of November.
Most-active CBOT soybean meal futures have plunged more than 20% off their mid-November peak, unusually heavy losses for this time of year. Good crop conditions in top meal exporter Argentina and a potential doubling of production from last year have weighed on prices.
As of Jan. 2, money managers’ net short in CBOT soybean oil futures and options was the largest since June 2019 at 50,554 contracts, up slightly on the week. Soybean oil futures hit seven-month lows on Monday while soybean meal, like soybeans, touched their lowest price since December 2021.
Both soybeans and soymeal for March delivery settled in technically oversold conditions on Monday with relative strength indexes below 30. Karen Braun is a market analyst for Reuters. Views expressed above are her own.
(Reporting by Karen Braun Editing by Matthew Lewis)
