Soybean price in overbought zone ahead of the WASDE report

Soybean price remains in the overbought territory as adverse weather in South America heighten demand for the US supplies. Investors are now keen on the WASDE report scheduled for release on Wednesday.

WASDE report

February’s World Agricultural Supply and Demand Estimates (WASDE) report is scheduled for release on Wednesday. In its January report, the US Department of Agriculture  adjusted soybean price to the upside by 50 cents to $12.60 per bushel for the 2021/22 season.

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The predicted rise in prices was founded on concerns of tight supplies from Brazil, Argentina, and Paraguay. Brazil and Argentina are ranked first and third respectively in the list of top soybean producing countries.

As recent as two months ago, traders and analysts alike expected a bumper from Brazil; an aspect that exerted pressure on soybean price. The country’s soybean-growing regions had received adequate rainfall during the planting season. This was followed by warm temperatures in areas such as Mato Grosso. The weather created the ideal conditions prior to the harvesting season.

Indeed, some analysts forecast an output of 145 million tonnes, which was a world record. However, the adverse weather conditions experienced in recent weeks has resulted in buyers shifting to US supplies. The La Nina weather has affected the crop in southern Brazil and Argentina.

Subsequently, US soybean sales for exportation have exceeded analysts’ forecasts by surging to close to 2 million tonnes. Besides, late last week, USDA cited a further sale of 252,000 tonnes to unidentified buyers.  With these factors in mind, investors will be keen on February’s WASDE report for cues on production and prices.  

Soybean price technical analysis

Soybean price has been on an uptrend for about three months now. In early November, it hit an 11-month low at $11.80 per bushel. The subsequent trend reversal has culminated into an 8-month high of 15.90. Over a span of three months, it has rallied by 32.94%.

On a daily chart, it is still above the 50 and 200-day EMAs, which is a bullish sign. Besides, for close to two weeks now, it has been in the overbought territory; currently with an RSI of 77.

In the ensuing sessions, it may pull back to around 15.14 or lower at 14.38 before reviving its rally. For as long as soybean price remains above the 200-day EMA, which is at 14.00, the bulls will remain in control.

Nonetheless, it may continue to find resistance along June 2021’s high of 16.00 in the short term.A move above that level will give the bulls an opportunity to retest the 9-year high hit in May 2021 at 16.66.