The Teucrium Soybean Fund (NYSEARCA:SOYB) provides investors unleveraged direct exposure to soybeans without the need for a futures account. Therefore, the decision to invest in this fund should be made after analyzing the soybean market.
At the moment, the soybean futures price is already well above its five-year range. Technically, this could indicate an overbought condition. On the other hand, it could be a sign of an extremely bullish market.
Excellent exports continue to provide strong market support. As of the first week of October, the accumulated volume of exported soybean together with the outstanding sales (sold, but not shipped) in the US amounted to 40.72 million tons or 68% of the current USDA forecast.
Of course, the biggest buyer is China:
The latest WASDE report was again positive for the soybean market. The forecast for global consumption was increased by 1.52 million tons, and the production forecast was reduced by 1.27 million tons. As a result, the forecasted deficit of this market was increased to 2.12 million tons:
For the United States, the USDA has lowered its forecast for soybean acreage for the current season:
As a result, the production forecast was lowered, and the expected surplus was reduced to 53.12 million tons. At the same time, the USDA forecasts that the US will export 59.87 million tons of soybeans this season. Thus, a significant decline in US soybean stocks is expected.
In the soybean market, as a commodity market, the price is formed on the basis of the balance between supply and demand. One of the key markers of this balance is the stock-to-use ratio. Therefore, in the long run, there is the relationship between the values of the stock-to-use ratio and the average price of the soybean futures.
In this context, we must recognize that the price of soybean futures is still undervalued, as in the world:
And in the US:
The money managers net long position in soybean has reached 238,394 contracts (multi-year maximum). At the same time, the funds almost do not keep short contracts.
The only thing that worries me now in the soybean market is the actions of funds, since this is an incredible amount of long contracts, sooner or later they will have to sell. But, apparently, the time has not yet come for this. And I think that, by the end of the year, the soybean ETF will rise to $17.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.