Technically Speaking          11/06 12:42

   Soybeans: A House of Cards?

   The soybean market has been on a solid bull run since mid-October with the 
active January contract rallying as much as $1.20 per bushel, bottom to top, 
during that time. The rally was certainly helped along by optimism that a trade 
deal could be worked out with China. That deal was verbally agreed to more than 
a week ago. However, can the ongoing rally hold up or even extend without 
concrete evidence that China will indeed adhere to the promise of buying 440 mb 
by the end of December?

Dana Mantini
Senior Market Analyst

   JANUARY 2026 SOYBEANS:

   While China had agreed at the meeting between presidents Trump and Xi to buy 
440 million bushels (mb) by the end of the year and 25 million metric tons 
(mmt), or 918 mb, for the following three years, we have not seen that in 
writing from China and to date only minor soy purchases by China have been 
reported. Making this even more of a mystery is the U.S. government shutdown 
and the lack of export sales data in the past 40 days.

   January soybeans, along with December soybean meal, had rallied sharply, but 
both markets had become extremely overbought technically. Thursday morning it 
appears both markets are rolling over to the downside. Although the agreement 
was certainly a positive development for the soy market, I think traders will 
soon need to see some concrete proof that China will book those commitments by 
the end of December. Time is running thin to get that much loaded and shipped 
by year end.

   Complicating the issue is the fact that China left a 13% import tariff on 
U.S. beans at a time when Brazilian soy values have tanked and Brazil is much 
more competitive into China. Rumors have China picking up another 20 cargoes of 
Brazilian beans in the past week for December-January. That is the very time 
period when U.S. sales to China typically rise sharply. This year, so far, 
China had bought zero new-crop U.S. beans until Cofco picked up a reported 
three cargoes last week as a good will gesture. Brazil beans on a delivered 
basis are said to be a sharp discount to U.S. soybeans for nearby and that 
spread widens even more into February-April.

   While we all want to be optimistic on China following through with its 
promise, the market must prepare for the worst in case they do not. Such an 
outcome could have the U.S. soybean carryout rising to as high as 500 mb.

   Thursday the market is showing some vulnerability and appears to be rolling 
over. This may only be a minor correction in an otherwise bullish market. 
However, if China were not to follow through on intentions by the end of 
December, we run into what is expected to be a record large new crop in Brazil, 
which could mean some early harvest as soon as late January. Soybeans continue 
to trade above all key moving averages, which signifies a bull market. However, 
in the worst-case scenario, an open chart gap way down at $10.63 on January 
would be the likely target of the selling that could result. Let's hope China 
ramps up its buying and shipments soon.

   KANSAS CITY DECEMBER WHEAT:

   After a nice rally on fund short-covering and spurred on by rumors of China 
buying U.S. wheat for the first time in more than a year, it seemed more like 
"buy the rumor, sell the fact" action on Thursday.

   Wednesday news stories indicated China bought just one cargo of soft white 
wheat and spring wheat appeared to be a big disappointment to traders. Earlier 
expectations suggested China may have bought as many as 10 cargoes of wheat, 
including soft red winter from the Gulf. More purchases might be reported once 
the government sales data is available. However, following an extremely 
overbought wheat market, sellers are out in force Thursday with the market 
appearing to be rolling over. Although U.S. wheat exports as verified by weekly 
inspections are ahead of expectations, there is an oversupply of wheat in the 
world and the U.S. is overpriced to Russia, the EU and especially Argentina. 
Thursday's break through the 50-day moving average suggests further weakness 
ahead.

   Comments above are for educational purposes only and are not meant as 
specific trade recommendations. The buying and selling of commodities, futures 
or options involve substantial risk and are not suitable for everyone.

   Dana Mantini can be reached at Dana.Mantini@dtn.com




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