The oilseed complex continued to rally week over week.
Since mid-September this year, soybeans prices had a strong rally, in line with bullish soybeans view.
We have seen calling for higher soybean oil prices for the last three weeks.
We continue to believe that soybean oil has further upside given fundamentals of alternative oils are getting supportive.
As long a crude oil prices remain in a range or trade higher, soybean oil can potentially trade a lot higher from current levels.
Most likely, in early 2021, prices will be sustained an upward trend until some severe demand rationing or 2021 planted acres expand significantly to make up for the shortfall supply.
So, till march, if south American issues persist, price pullback will be opportunities to establish long positions.
Soybeans have a good chance of even trading up to $13, depending on how the weather develops from here.
This prices level, is supporting by South American weather forecast, by higher than estimated US crush pace and expectations that the argentine port strike may go well into the following year, pushing more of the world demand toward the US origin soybeans.
So, overall primary fundamental themes to watch for remain always the same, i.e., developing weather in South America, demand for US production from China, and expected USD weakness.
In addiction, we continue to hold our view that the US Ag is overestimating the South American crop size and in turn underestimating the potential world demand that will be diverted towards the US.
So, we expect to see funds adding further length in both corn and oilseed complex, with long and short ratios expected to stay above 80%, suggesting a bullish consensus view among the funds.
Wheat prices rallied past week too, even if, there was no new fundamental wheat-related information that could have pushed the wheat values higher.
The Russian export duty applicable from the 15th Feb was already declared last week, which ideally had should result in higher liquidity in the short term.
However, with the lack of offers from Feb onwards, the market has started pricing a tighter world supply from mid-Feb onwards.
An other reason for this week’s rally in wheat was the strength in corn prices.
Persistent risk of a further rally in corn spilling over to wheat remains.
However, independently from this, wheat is at its higher end of the range and could move lower if the corn prices remain at this level.
Corn prices rallied higher over past week and in line with weather forecasts for South American corn-growing regions.
Long term forecasts are not favorable to the crop in Brazil.
However, we don’t think it is a factor yet as long-range forecasts have low accuracy.
With the current break out in prices, corn could potentially continue to rally towards $5.
