After a month-long decline, the soybean market finally turned upwards this week, rising above two-week highs on Thursday. This rally was stimulated by hot, dry weather across Argentina and Southern Brazil which had traders doubting South America's ability to dump a record crop on the global market. Furthermore, the potential for the renewal of a $1 per gallon tax credit on biodiesel encouraged farmers and "bean bulls" as soybean oil is the primary source of U.S. biodiesel.
Despite these potential bullish factors, market bears note that the weather in South America may improve as the La Niña effect takes hold and that Chinese buying has been waning in the last week, indicating that the world's supply/demand balance could push prices lower. As such, many American farmers are already looking to hedge some of next year's production, to protect against further price declines.
As of midday Friday, March Soybeans were trading at $9.45 per bushel, up 5% from their recent lows.
Crude Oil Runs out of Steam
Last week, crude oil hit a four-month low at $69.50 per barrel as traders around the world sold commodities and bought the U.S. Dollar. This week, crude oil staged a strong recovery, rising Thursday to $75.69 per barrel as U.S. jobless claims dropped and cold weather increased demand. Yet the market was unable to sustain the recent rally on Friday when the Department of Energy released storage inventory figures that showed a larger-than-expected build in crude oil and gasoline stocks. By Friday at noon, crude oil and gasoline had erased much of their recent gains, with March crude trading at $73.40 per barrel and March gasoline at $1.90 per gallon.
Euro Currency Slumps
Although France, Germany and other European nations pledged support this week for Greece during its debt crisis, traders were not inspired by the potential for a European bailout. During Friday's trading session in Europe, the Eurocurrency fell to its lowest level against the U.S. Dollar since last May. Trading Friday at $1.36, the Euro has dropped nearly 11% since early December.