Soybeans Rebound From 15-Week Low as Speculator Buying May Gain

Soybeans rose the most in more than a week on speculation that this month’s slump to the lowest level 15 weeks may encourage investors to buy contracts to close out profitable bets on lower prices.

In six of the past seven weeks, hedge funds and other large speculators increased their bets that soybeans would fall, with so-called short positions on Jan. 19 reaching the highest level since October, government data show. Soybeans fell as much as 11 percent this month to $9.32 a bushel in Chicago today, after the government said on Jan. 12 that U.S. farmers harvested the biggest crop ever last year.

“Prices fell to test support the past two days at $9.35, where trend-following speculators and hedge funds decided to cut short positions,” said Tim Hannagan, a grain analyst for PFG Best Inc. in Chicago. “It’s just a position realignment.”

Soybean futures for March delivery rose 7 cents, or 0.7 percent, to $9.475 a bushel on the Chicago Board of Trade, the biggest gain since Jan. 13. Earlier, futures slipped to the lowest level since Oct. 9.

The price fell this month on signs that demand will dwindle for shipments from the U.S., the world’s biggest exporter and producer. Brazil and Argentina, the second- and third-biggest growers, together will harvest a record 118 million metric tons this year, the USDA said earlier this month.

Hot, dry weather this week will reduce soil moisture and increase stress on crops in Argentina before storms develop on Jan. 30 and Feb. 2, said Mike Tannura, the president of T-Storm Weather in Chicago. As much as 1 inch (2.5 centimeters) of rain will fall over the weekend and cooler temperatures will improve crop conditions, Tannura said today in a note to clients.

“We have had 10 days of dry weather that may have encouraged some buying,” Hannagan said. “Prices could fall to $9.15” should rainfall during the next week improve crop prospects, he said.

Soybeans are the second-biggest U.S. crop behind corn, valued last year at $27.4 billion, USDA figures show.

By Jeff Wilson
Bloomberg