Big Brazilian crop may lure bears back to the US soybean market -Braun

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NAPERVILLE — Commodity funds have been bullish in Chicago soybeans for three consecutive years now, and despite a rout in futures last month, funds’ soy views as of last week were essentially unchanged from mid-March.

As of Wednesday, CBOT soy futures had closed lower for six consecutive sessions, losing a total of 5%. That is similar in strength to the late-March downturn, but both nearby and deferred contracts remain above their March 24 lows.

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However, July soybeans ended at $14.14-3/4 per bushel Wednesday, the most-active contract’s lowest settle since late October.

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Historically low port premiums for Brazilian soybeans have weighed heavily on prices since they suggest supplies are currently outpacing demand. And although U.S. soy plantings are slated to be smaller than the month-ago thinking, farmers are off to potentially their fastest-ever start.

Within the last few days, CBOT soybean futures began trading at the lowest levels for the date in three years, something that was last applicable in 2020.

Money managers briefly held a net short position in CBOT soybean futures and options in mid-April 2020, but the last time they were definitively bearish was March 2020. As of April 18, they held a net long of 134,782 contracts, decently bullish though less so than in the last two years.

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But speculators’ avoidance of short soybean bets has remained constant. As of April 18, gross soybean shorts totaled just over 19,000 contracts, slightly below the running two-year average and well below the longer-term average, room for expansion should sentiment become increasingly negative.

Funds got rid of longs during last month’s sell-off instead of adding shorts, though it is unclear if bears gravitated toward the soy market in the last few days as they did for corn at the end of February. Bears’ last attempt to enter soybeans was in late 2021, but the effort was over by the start of 2022.

BIG BRAZIL CROPS

The recent heavy unloading of Brazilian beans on the market is related to the timing of harvest, which was 92% complete as of Monday, but it is also linked with the fact that Brazilian farmers had been very slow sellers of their beans in the months leading up.

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The same could soon happen with corn, as farmers have been sluggish in selling their second crop, which is the corn Brazil exports. Brazilian agency Conab sees Brazil’s total corn crop near a record 125 million tonnes versus last year’s high of 113 million.

Brazil’s second corn crop is seen topping 95 million tonnes this year, a mark the country’s total corn crop first achieved in 2016-17.

That harvest begins in June, and crops are doing well so far. As of Tuesday, some 95% of second corn in both Parana and Mato Grosso do Sul were in good condition. Three-fourths of Parana’s crop had yet to enter the reproductive stages, so weather remains important going forward. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Editing by Leslie Adler)