Soybean Prices Find an Upward Channel
What the Latest USDA Export Inspection Report Just Did for Grains
Trends in soybean prices
Soybean futures prices for March 2016 rose sharply and traded near the crucial support of 880 cents per bushel on February 16, 2016. Prices are showing an upward movement, shifting from previous rangebound expectations. Meanwhile, the volume of soybean contracts increased by 72.7%, and open interest declined by 5.8% on February 16. Still, prices are trading above the key 20-day and 50-day moving averages of 875 and 876 cents per bushel, respectively, on February 16.
The chart suggests that soybean prices could stay in the range of 870–885 cents per bushel in the short run.
Price drivers
US Department of Agriculture’s weekly export inspection report on February 16 indicated strong support for soybean exports. But the boost in soybean output projections from critical South American production regions could hurt soybean prices. The NOPA (National Oilseed Processor’s Association), in its January 2016 crush report, suggested weaker domestic crushing activities, which pushed soybean prices down.
Stock reactions
This improvement in soybean prices supports farmers’ revenues and could further support fertilizer sales, which is directly related to the values of the fertilizer companies. Enterprise Products Partners LP and Martin Midstream Partners LP (MMLP) increased by 6.2% and 5.5% for the second consecutive trading day, showing rises of 10.5% and 7.6% over the two-day period.
Meanwhile, CF Industries Holding (CF) and Chemical & Mining Company of Chile (SQM) jumped by 3.8% and 2.3% on February 16 with the rise in soybean prices for the third and fourth straight trading day. The Material Select Sector SPDR Fund (XLB) rose for the second straight trading day, increasing by 1.5% on February 16 and showing a rise of 4.5% over the two-day period.
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