A “Freight Train of Grains” Didn’t Cause Soybeans’ Recent Price Crash. So… What Did?

by Nico Isaac
Updated: May 26, 2023

This weekend, I underwent the long-dreaded job of transplanting my newly fruited strawberry and blueberry plants to a larger garden bed where they can stretch out their broadening roots. Ideally, this more hospitable space will enable the plants to reach maturity and yield a bountiful harvest come summer.

But that's the ideal. The reality is relocation is incredibly stressful on the plant; they can go into immediate shock. It can be a lose-lose; they outgrow their old habitat but then fail to thrive in their new one. And all I can do is nurture and water them and hope for the best outcome.

The precarity of safely bringing plant life into being can't be overstated. Any gardener would agree to this, as would every farmer across the world whose livelihood depends on ensuring the seeds they put into the ground survive amidst the numerous shocks of inclement weather, crop disease, fungi, pests and so on.

It's this unpredictability of vegetation that also contributes to their price volatility in the commodities marketplace. But contrary to the widely held "market fundamentals drive price trends" view, these external shocks aren't the only thing driving commodity price trends. If they were, it would be next to impossible to anticipate the directionality in any commodity including grains. Period.

But that's not the case, thanks to technical market analysis which examines a market's internal driving forces. For Elliott wave analysts, that internal force is investor psychology, which unfolds as clear patterns directly on price charts. That's no matter what shocks are in play outside those charts.

Take, for instance the recent performance in soybeans. Since mid-April, beans have been on a downtrend, falling to a 10-month low on May 19.

Mainstream media pointed to a supply glut as the decline's catalyst, namely a May 12 US Dept. of Agriculture supply/demand estimate report confirming a record soybean crop and "freight train of grains barreling toward 2023 and 2024." (May 24 Storm Lake Times Pilot)

From Farm and Dairy on May 24:

"Fast Planting Help Grain Price Crash Continue

"The problem with trying to pick a bottom to the market, as I have been doing the last two weeks, is that it is easy to underestimate just how low things can go. Like one big global game of Limbo, the pole goes lower and someone manages to go under it without falling." (May 25 Farm and Dairy)

But while it appears you can draw a straight limbo pole line from the May 12 "bombshell" report and falling soybean prices, you can't. In fact, soybeans' recent decline began almost a month earlier.

And, on April 13, our Commodity Pro Service identified the source of soybeans' imminent slide: a bearish reversal sequence and start of a third-of-a-third wave pattern down. There, we showed the following price chart and said:

"It might be worthwhile maintaining a bearish outlook using 1527.6 as the line in the sand. We're looking for a decline that comes back below 14005 though a third wave should move well beneath that level. The risk is known, it's predefined, it's limited, particularly compared to the downside potential. These are the kinds of situations we're always looking for."

And this next chart captures beans' fall to 10-month lows on May 19. (Editor's Note: Prices reflect the rollover contract to July.)

In the end, I've done all I can do to help my newly transplanted berry bushes survive and now, their future is out of my hands.

But for commodity investors, the future of your success is in your hands. And, while not every Elliott wave forecasts works out like this, it could start today with our Commodity Pro Service.