Soybean futures were able to have an impressive end to last week’s trade with prices climbing back out above trendline resistance and the 20-day moving average on Thursday which may have triggered some technical short covering and follow-through momentum in Friday’s trade. Last week’s close marked the second consecutive week of gains, the longest streak since October.
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Friday’s Commitment of Traders report which shows Fund positioning through Tuesday March 5th, showed funds being net sellers for the 16th consecutive week, blowing the old record of 10 straight weeks out of the water. Funds are now net short 171,999 futures/options contracts, broken down that is just 52,457 longs VS a staggering 224,456 shorts. This net short position eclipses the old record set on May 14th, 2019, when funds were short 168,835 contracts.
So, what happened in positioning and prices following the last “Big Short”? Well, from May 14th to June 25th, Funds were net buyers of 134,793 contracts, trimming their massive net short position down to just 34,042 contracts. As you can see from the chart below, that helped rally July soybeans over $1.00 during that short covering rally.
What happened after that? The new crop November contract topped out and gave background into the Fall months. As mentioned in a similar write up on corn last week, we bring this to light not to offer false hope that we will see the same scenario, but to remind you that despite how bleak things may seem, time presses on and opportunities will continue to come and go. Having a plan in place ahead of time that doesn’t revolve around hope can help remove some of the emotion in making those important decisions, which is what our team is here for.
Seasonally speaking, this is a time of year where we can see old crop soybeans consolidate and attempt to work higher, with that said, this year has been anything put seasonal which is illustrated by the chart below.
MRCI has optimized some of the back testing for May soybean futures, finding that pries have been able to rally from March 17th to April 21st for 13 of the last 15 years. The average gain during that time was roughly 56 1/2 cents while the average loss for the two losing years was just over 37 cents. Important to note that past performance is not necessarily indicative of future results and that there are no sure things when it comes to navigating the markets. If you need help devising a strategy to help manage risk, our team is here to help!
Need help navigating the markets and designing a hedge strategy tailored to you? Our team is here to help!
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