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Could Soybeans Swing Higher?

Jun 29, 2020

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The effects of the COVID-19 virus have been felt across global financial markets. Stocks, bonds and currencies have all seen heightened volatility due to the viral spread and should continue to see significant spikes of volatility and selling as worries over the pandemic persist.

The grain markets have not only had to contend with the global impact of COVID-19, but also with the ongoing U.S./China trade war that some have suggested could find itself back at square one in the coming weeks.

After seeing a strong decline of nearly $1.00 per contract, soybean futures have been on the rise lately as they attempt to rebound. The bean market saw a low in the $8.28-$8.29 region before staging an initial bounce higher. That rebound saw prices rise as high as nearly $9.00 before selling pressure once again took control of the market, pushing prices back down to a fresh swing low of less than $8.20.

Since that swing low, however, the market has been trying to regain some lost ground and has had some success. The market recently reached a multi-month high, trading around $8.80 before backing off a bit. With some market support in the $8.30 to $8.50 region, the bulls could potentially look to stretch the recent bounce higher, retaking the $9.00 level in the process while also returning the market to pre-COVID-19 price levels.

The bulls may not get too excited, however, as soybeans have essentially been range-bound from $8.00 to the mid-$9.00 area for the last couple years.

The ongoing U.S./China trade conflict could put the brakes on any rallies, however, and must be monitored closely. The initial phase of a trade agreement remains in place even as the U.S. has ratcheted up its rhetoric on China and the Coronavirus, suggesting that China was not forthcoming and did not do enough to contain the virus while warning the rest of the world. If that initial deal were to fall apart, both sides would begin again at square one, and the ongoing trade war could potentially stretch for several more months or even years.

The coming weeks and months will likely see soybean markets taking their cues from the spread or containment of the Coronavirus and any other developments on global trade. Further declines in the dollar could also provide some bullish pressure on bean prices while further U.S. protests on race and policing could provide the bears with some additional ammunition.

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