What the Soybean Chart is Telling Traders

Andy Waldock  |

Commercial Traders, as reported by the CFTC’s Commitment of Traders Report have been consistently buying beans since early March. They’ve been net buyers in nine out of the last twelve weeks and have purchased nearly 100,000 contracts over that same time frame. Commercial buying pressure has been a reliable indicator to forecast the price of beans. We’ve seen, and profited from this pattern consistently over the last few years as you can see on this annotated soybean chart with the commercial position plotted as well.

There is one primary difference between the current run and what we’ve seen in the past. The chart we posted shows strong commercial buying on major declines in the soybean market. This makes all of the sense in the world as companies that are end users of beans seek to lock in their input costs at advantageous prices. The difference this time is that soybeans have been consolidating near the top of their trading range. Commercial buying of this persistence and at these elevated levels could easily force the market above 2013’s highs near $15.60.

We are not currently long this market as the decline leading into the May 7th push our market momentum indicator below the oversold threshold. Therefore, we patiently wait for a pullback that may or, may not come. Either way, the persistent buying by the commercial traders clearly shows that there are more soybean acres to be added.

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