Soybean prices in the past month have wilted faster than a soy plant in the South Pole. As I write this the grain stands at its lowest level in four months.
And, according to the mainstream experts, two main factors have put the bear in beans:
1) Recent data indicating a record soybean crop in Brazil and Argentina, the second biggest growers and exporters of the grain after the United States.
2) A January 12 US Department of Agriculture report revealing a rise in US soybean production to a new, all-time record. In the words of one early February news source, "That USDA report on January 12 turned the world upside down." (AP)
There's just one problem with that line of reasoning: The seeds of soybeans' decline were planted long BEFORE the January 12 production report. In fact, as early as December 2009, EWI's chief commodity analyst and long-time Futures Junctures Service editor Jeffrey Kennedy foresaw the soybean world "turning upside down."
Case in point: In the December 2009 Monthly Futures Junctures' "Featured" market and "Wave Watch" segments, Jeffrey devoted extra space to the bearish potential in soybeans. There, he presented the following close-up of the market and wrote:
"Since the late 2008 low, prices have traveled mostly sideways. This type of price movement essentially defines a triangle wave pattern... [and] calls for further selling."
For the record, the triangle illustrated in the chart above is of the "Contracting" variety. To wit:
A contracting triangle, or "horizontal" as it's known for its sideways direction, contains five overlapping waves labeled A-B-C-D-E. In a regular variety, the triangle takes place entirely within the area of preceding price action. In a running triangle, wave B exceeds the start of wave A to set a new extreme. All triangles occur in the position prior to the final actionary wave in the pattern of one larger degree, i.e. wave 4 of an impulse, or wave B of an A-B-C. And finally, once a triangle is complete, it is often followed by a swift, short "thrust" in the opposite direction.
According to Jeffrey's wave count, the contracting triangle in soybeans was set to rally in a final wave E, followed by a powerful "thrust" down to below the $9.00 per bushel region in early 2010.
Now the only question is: Has the selloff in soybeans met its end? Well, nobody answers that with more insight than the February 10 Daily Futures Junctures. There, Jeffrey Kennedy revisits the soybean market to reveal whether the grain's slide has fulfilled its downward duty.