It was another week of falling prices for soft commodities (DBA, quote) once more, as over supply issues continue to dominate across all the major markets, and clearly evident from the weekly charts. It is the US which sets the price for world markets as the largest exporter, with the US Midwest corn belt set to produce a record harvest for a second year.  

Soybean (SOYB, quote)  too is expected to produce the largest crop ever on record. This picture of bumper harvests is also mirrored in Canada, and even events in the Ukraine and Russia (RSX, quote)  have had little impact. China (FXI, quote) too, is increasingly adding storage facilities to cope with its own booming harvest and imports, with corn (CORN, quote) and rice now in plentiful supply, and with Europe also forecasting record crops, it’s little wonder that grain markets are falling, and falling fast. In addition, a resurgent US dollar is also helping to propel commodities lower, with the CRB index closing lower once again at 279.17. All of this is in sharp contrast to the shortages which were the catalyst for a surge in prices in 2007, which in turn sparked riots in many countries around the globe.

If we start with soybean, the key price action here was the breach of potential support in the 1030 per bushel region early in September which failed to hold. The market duly broke lower on high volume, with last week’s price action closing on a wide spread down candle and high volumes, ending at 910.25 per bushel. Soybean prices are now approaching a second and perhaps even more significant area of potential support in the 900 per bushel region, and if this is breached, then we can expect to see the commodity move through this level and lower still, perhaps to test the 840 per bushel region in the longer term. In overnight trading on Globex soybean prices have fallen once more with the November contract trading at 906.00 per bushel.

Finally to wheat, and here perhaps we are starting to see the first signs of a pause point, following the sharp declines of the previous three weeks with last week’s candle closing as a small doji candle, but on high volume. This is a clear anomaly for volume price analysis traders, clearly signalling buyers moving into the market at this level, and the first signs of stopping volume in the downwards trend. As always, I must stress, markets rarely reverse a trend on one candle, but nevertheless, this is the first sign that perhaps soft commodity prices, and wheat in particular, are just starting to find a bottom. Indeed in overnight trading on Globex the December contract is currently trading at 478.50 per bushel, moving off last week’s close of 474.25. Whilst one swallow does not make a summer, it will be interesting to see any reaction in the associated markets, particularly of course for corn. The probability will be that this is simply a pause point, before a further move lower, but for commodity traders in wheat, it may be a case of trade what you see and not what you think this week!

Anna Coulling is a trader with over 16 years’ experience and founder of AnnaCoulling.com