New Bull Market Surprises Happen To The Upside

Outside myself, I know of nobody who was forecasting higher grain prices.  Commodities as a whole were coming off of a horrendous down cycle which took commodities to their lowest levels since 1973.  Commodities were also in the timing band to mark a 3 year cycle low.  The CRB chart below clearly shows that a strong rally with higher highs and higher lows are in place with all commodities.

Despite bearish fundamentals, I knew fund buying (short covering) would fuel a huge rally, but I was not expecting such a strong rally to begin while the crop was still in the bag.  The timing and the magnitude were both unexpected.  The baby bull is underway!

We are now in what I would categorize as an exhaustive phase of this baby bull with soybeans.  The baby bull has already caused many farmers to abandon all common sense and believe the market is ready to push higher from here.  I contend that the market is exhausting or running out of buyers at this stage.  It is still early May for goodness sakes and planting conditions remain nearly ideal.  The Buenos Aires Grain Exchanged estimates Argentine Soybean cumulative yield above last years record.  Patience is required to make good marketing decisions from here on out. I doubt seriously that there is enough bullish news or sentiment to break soybeans above the resistance area set back in December of 2014.

Soybean prices will also be capped below the 200 week moving average for the time being.

If we achieve a full 50% retracement on soybeans, I will be doing something which I rarely do, which is to recommend lifting hedges.  I expect that will be in the mid to late June time frame.