Update from May 1oth Commodity Speculation Report for Soybean Oil.

Soybean oil futures continued to drift downwards last week, closing below the key support level of $0.37. The market still looks extremely “bearish,” continuing the slide that started during the middle of April.

Factors contributing to the expected downward trend in the market are:
  • According to Refined Oils Weekly Wire, (published weekly by Bunge for its customers), “corn planting progress came in at 87% and beans at 38%, both still above average. Corn conditions came in as favorable, 57% of corn planted is in ‘good’ condition.”
  • We have previously considered the potential effects of the biodiesel tax credit passing as a “bullish” factor, but according to Refined Oils Weekly Wire, it is looking less and less likely that it will happen before June, exerting potential downward pressure on the market.
  • The outside markets have been under considerable pressure over the last week. The European economy continues to look “fragile,” adding pressure to the domestic US markets.
Conversely, factors which might turn this market around might be:
  • According to Bunge, the agricultural markets have shown a downward trend in the last few weeks, together with most of the financial markets. “Bearish sentiment has been a consistent theme of late and as a result the markets (especially soybean oil) are much oversold. Thursday’s strong close in the face of outside market turmoil was a positive sign going forward.”
  • Soybean oil exports out of the US into China are likely to increase as Argentina continues its’ dispute with China.
This writer believes that, contrary to the last report, a number of “bearish” factors have taken over the market in the last week. The Dow Jones rally has not sustained itself and crude oil continues to struggle to hold a level above $70 / barrel. The European debt factor continues to exert considerable downward pressure on all US markets. To this end, it is unlikely that the soybean oil market will make any kind of serious rally in the foreseeable future.
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