The Hightower Report

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NEAR-TERM MARKET FUNDAMENTALS: Aggravating showers in Brazil and positioning ahead of key USDA reports has helped hold the market in a consolidation for the past several sessions. Brazil continues to struggle to get the bumper and thought to be record size crop out of the ground but the harvest is nearing 60% complete. May soybeans experienced an outside day down yesterday and closed near the lows of the session but losses on the day were about half of the corn market. Weakness in corn helped spark long liquidation across the grain floor. Volume was said to be light. The head of Paraguay’s largest soybean producing group believes the country may produce a record crop of near 8 million tonnes from 7.48 as an early estimate. A continued wet weather forecast in parts of northern Brazil helped to support the market early with talk of declining quality and quantity for the late harvested crop. The wet weather looks to continue for another week or more in northern Brazil and southern Brazil looks wet for the next few days with some hefty rain totals possible which will slow harvest. China soybean futures were up on Monday and again overnight which helped to provide some underlying support. Poor crush margins in the US combined with talk of hefty meal stocks has traders talking about a slowing crushing pace. Positioning ahead of the USDA Planted Acreage and stocks reports for Thursday morning is helping to support with more talk of lower plantings as a factor supporting November soybeans. Weekly export inspections came in at 29.53 million bushels which was the high end of expectations. Shipments of 13.7 million bushels are needed each week to reach the USDA projection. China sold 91,586 tonnes of rapeseed oil from their reserves at auction overnight which was seen as stronger demand than last week as most of the oil offered was moved. Traders see March 1st stocks for soybeans near 1.3 billion bushels for the report on Thursday as compared with 1.27 billion bushels last year. Traders see planted acreage near 76.9 million acres as compared with 77.4 million last year and 78 million from the USDA Outlook Forum estimates from last month. Estimates are as high as 78.5 million and as low as 75 million. If producers plant just 75 million acres and usage comes in at 3.34 billion bushels, down from 3.355 billion this year, ending stocks would come in at just 22 million bushels. At 78 million, ending stocks come in at 150 million bushels using trend yield of 43.2 bu/acre. Ending stocks are projected at a tight 140 million bushels for this season.

TODAY’S GUIDANCE: The market will need to see a higher than expected planted acreage forecast this week in order to avoid an extremely tight outlook into next year. Demand has been slow with a noticeable decline in activity out of China as they continue to fight inflation. Any set-backs in November soybeans look like buying opportunities.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: A wet forecast for northern Brazil areas is expected to continue to cause harvest issues and a downgrading of the soybean crop and this combined with a much more positive influence from outside market forces helped support the soybean market yesterday and again overnight. Talk of quality issues for the Brazil crop and reports of beans sprouting from too much rain have helped support. A weak export market yesterday and ideas that the Argentina harvest remains active were seen as factors to limit the upside. News from China that the Central Bank will raise lenders required reserves by 50 basis points helped pull the market off of the highs overnight but most commodity markets absorbed the news and stayed quite strong. A weaker US dollar, a strong stock market and strength in gold and crude helped to support. This is the third tightening measure this year and the sixth since November for China as they fight inflation. May soybeans closed sharply higher on the session yesterday but down about 15 cents from the mid-session peak. Ideas that soybeans need to gain in value compared with corn in order to entice more planted area this spring added to the positive tone yesterday. A drier forecast for Argentina and southern Brazil is expected to boost harvest progress. Weekly export sales for soybeans came in at just 146,800 metric tonnes for the current marketing year and 67,700 for the next marketing year for a total of 214,500 which was well below trade expectations. However, cumulative soybean sales stand at 92.3% of the USDA forecast for 2010/2011 marketing year versus a 5 year average of 84.1%. Old crop sales of just 133,000 metric tonnes are needed each week to reach the USDA forecast. Meal sales were also lower than expected at 58,300 tonnes. Sales of 84,000 metric tonnes are needed each week to reach the USDA forecast. Net oil sales came in at 14,200 metric tonnes as compared with just 8,000 needed each week to reach the USDA forecast. Cumulative soybean oil sales stand at 83.2% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 51.9%. Basis levels improved up to 5 cents at the gulf yesterday with talk of slow producer selling helping to support.

TODAY’S GUIDANCE: Rumors of China buying US soybean oil could not be confirmed and news of China tightening did not seem to provide much selling interest. Ideas that the market is oversold and a shift back to higher-risk commodity trades and a shift back to global growth themes for key world money managers “plus” increased inflationary fears are factors which have helped support. If we plant just 77 million acres and get a trend yield of 43.2 bu/acre, ending stocks are projected at just 107 million bushels for the 2011/12 season. This would suggest the need for more acres and the need for a weather premium this year for new crop soybeans.

TODAY’S MARKET IDEAS: November soybean buying support moves up to 1301 today with additional support at 1252 1/2 with 1339 3/4 as next resistance. A close over resistance leaves 1465 1/2 as a longer-term upside objective.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Harvest delays in Brazil look to persist for much of next week and Argentina port workers have slowed work at two terminals and traders see these as reasons to suspect somewhat better demand for US soybeans and products. In addition, Argentina is apparently cracking down on export tax issues with major grain exporters and this could slow movement from the region as well. Rumors of China buying several cargoes of US soybeans has helped support the market as well. News that China was a major buyer of old crop soybeans in the weekly export sales report added to the positive tone. May soybeans closed sharply higher on the session yesterday and to the highest close since February 17th. A weaker US dollar and a surge higher in US equity markets were seen as positive. In addition, there is still talk that China plans to reduce import tariffs on a range of products and traders believe this might include vegetable oils. The jump in crude oil overnight supported the palm oil market. Weekly export sales for soybeans came in at 361,700 metric tonnes for the current marketing year and 283,600 for the next marketing year for a total of 645,300 which was well above trade expectations. Cumulative soybean sales stand at 91.1% of the USDA forecast for the 10/11 (current) marketing year versus a 5 year average of 82.0% sold for this time of the year. As result, old crop sales of just 143,000 metric tonnes are needed each week to reach the USDA forecast. Meal sales came in at 149,600 tonnes. Oil sales came in at 16,000 metric tonnes all old crop which pushed cumulative sales to 87.9% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 48.1%. Sales of 5,000 metric tonnes are needed each week to reach the USDA forecast. Argentina dock workers have blocked two major grain export terminals in Rosario due to pay demands. Heavy deliveries for meal were seen as a limiting factor early but weakness in energy markets helped spark meal/oil spreading to support solid gains in meal and a strong close while May soybean oil closed slightly lower on the day. Oil saw solid gains overnight.

TODAY’S GUIDANCE: China buying old crop soybeans in the weekly sales report and rumors of sales this week are positive development as ending stocks are already tight and the USDA may need to raise their export outlook if the pace continues. Palm oil production will need to expand quickly in the months just ahead without glitches or there is more upside potential for vegetable oils as supply is extremely tight and demand improving with higher energy prices. The outlook for a surge in corn and cotton plantings leaves traders wondering where the acres will come from to see a rise in plantings. Support for May soybeans is at 1402 and 1381 3/4 with resistance at 1444 and a resumption of the uptrend leaves 1532 3/4 as a possible upside target. Buying support for November soybeans moves up to 1351 and 1335 with 1454 as next upside target.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Meal was weaker in Europe on Monday and soybeans saw volatile trade overnight with March soybeans moving from as much as 17 3/4 cents higher to sharply lower late in the overnight session. Ideas that the COT report showed an overbought condition plus improving crop prospects for South America have helped spark some long liquidation selling recently and traders appear somewhat concerned that the USDA outlook conference will increase planted area for the coming year. These factors have sparked the selling with open interest already down 49,816 contracts from the February 10th peak. Libya is not seen as a significant consumer or producer of commodities except crude oil and the political events of the weekend spark a surge in risk premium in energy markets. March soybeans closed 36 1/2 cents lower on the session Friday and down 48 cents for the week. Long liquidation selling pressures ahead of the long weekend was seen as a negative force as speculators were seen as holding a very large net long position coming into the week. News that China raised interest rates to fight inflation plus talk of a large Brazil harvest ahead helped to pressure the market early. While China leaders are exploring the idea of lower soybean and soybean oil import taxes, traders see the potential for action as weeks away and the rumors provided only temporary support. There are concerns that China might cancel more old crop soybean sales with the US but a firming tone to outside markets with a jump in metals and energy markets on Friday and a continued strong tone to equity markets helped support the bounce off of the lows. There are rumors that China bought four cargoes of soybeans from Brazil and three cargoes of soybean oil from Argentina. Traders see good weather in Argentina over the past few weeks as reason to suspect improving crop conditions ahead but too much rain in Brazil may slow harvest progress. The Commitments of Traders reports as of February 15th showed Non-Commercial traders were net long 157,812 contracts, a decrease of 30,796 contracts for the week and this is an aggressive selling trend from funds and the selling trend is coming off of a near record net long position the previous week. Commodity Index traders held a net long position of 174,303 contracts, down 6,958 for the week. For meal, Non-Commercial traders were net long 35,398 contracts, a decrease of 11,636 contracts. Non-Commercial and Nonreportable combined traders held a net long position of 57,775 contracts, down 15,263 contracts for the week and the spec selling trend is seen as a negative force. For oil, Non-Commercial traders were net long 64,745 contracts, a decrease of 24,116 contracts for the week and the aggressive selling trend is seen as a short-term bearish force. Commodity Index traders held a net long position of 98,722 contracts, up 2,814 contracts for the week. In the semi-monthly soybean sales overnight, China sold just 6,106 tonnes of the 299,072 offered.

TODAY’S GUIDANCE: The market does not appear to have the short-term news to offset the potential for more long liquidation selling ahead. South America crops look to be improving and the focus for US markets today could be on “risk aversion” and trend-following funds hold a net long of 128,000 in soybeans and 46,000 in oil so short-term long liquidation selling may continue into early this week. November may find support first with a need to avoid losing acres.

TODAY’S MARKET IDEAS: Buying support for November soybeans comes in at 1321 and 1313 with resistance at 1353 and 1362 1/4. Keep 1433 1/2 as next upside objective.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The market saw continued weakness overnight and moved close to the level seen ahead of the USDA January 12th reports before catching support and moving higher on the day. Ideas that the Argentina crop has stabilized and might even improve plus talk that short-term demand for vegetable oils could ease during the Lunar New Year were seen as negative force to drive the market lower. Palm oil futures are sluggish this week even with talk that January palm oil production in Malaysia could be down 5-10%. Traders see continued good rains in Argentina through the middle of the week next week before the region might dry down again. Workers at the key export port of Rosario in Argentina indicated that they will block the entrance for loading ships and may also block the entrance for soybeans moving to crushing plants to six big companies. This could stop grain shipments and could slow or halt crushing at key plants located near the export port. The market was down sharply at the mid-session yesterday and lost another 10 cents late in the day as fund trader long liquidation selling was noted late in the day. The sharp sell-off in energy markets and weakness in equity markets soured the tone late in the day. Improving crop conditions in Argentina, a sharp break in crude oil and metal markets and a rally in the US dollar combined to spark fairly aggressive selling from speculators to drive the market sharply lower. The USDA confirmed a sale of 110,000 tonnes of US soybeans to China but indicated later in the morning that the sale was announced in error. The USDA also confirmed a sale of 2.74 million tonnes for China for the 2011/12 season which was thought to be the largest single-day sale on record. This is part of the sales announced from the trade delegation meetings last week. The USDA also confirmed a sale of 114,000 tonnes of US soybeans to Taiwan. Cash basis levels are said to be weak due to a slowdown in meal demand and weaker crush margins. Oil and meal were also under pressure into the mid-session with March meal at the lowest level since January 12th. Traders see increased talk from world politicians that more regulation may be needed to control food inflation as a potential negative force.

TODAY’S GUIDANCE: The threat of more Argentina export blocks and protests could push more exports to the US in the short-term. Oil export sales have already reached 84% of the USDA forecast for the year vs. 35.8% normal and meal sales reached 60.3% vs. 47.3% normal. If the USDA raises their export forecast, the total crush number might be adjusted higher and ending stocks lower. Soybean sales have reached 84.7% of the USDA total vs. 71.8% normal. Higher exports would also tighten ending stocks. We do not see a normal “February” break under the current set-up and on the contrary see the “need” for November soybeans to move higher right now in an attempt to capture more planted acreage this year.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: The outlook for a mostly dry trend for Argentina weather for the next week helped to provide support for the market overnight despite weakness in outside market forces. After a week of mostly dry weather, there is still some hope for better Argentina rains in the 6-10 day forecast. China imported 5.43 million tonnes of soybeans in December, up 13.6% from last year. This pushed the total for all of 2010 to 54.8 million which was up 28.8% from the previous year. March soybeans closed 13 cents lower on the session Friday and down 38 cents for the first week of the year and this came after posting a contract high on Monday. Fears of index fund selling, a mixed forecast for weather in Argentina and fears that China will continue to make tightening policy moves ahead helped to drive the market lower Friday. A strong dollar and weakness in other commodity markets added to the negative tone. Private exporters reported to the USDA optional origin sales of 180,000 tonnes of soybeans to China. This may or may not include US soybeans. Brazil weather forecasts call for continued good rain events and good growing conditions for the next few weeks. Traders see a 3-4 million tonne decline in world ending stocks for the supply/demand report on Wednesday due to lower Argentina production estimate. Taiwan bought 60,000 tonnes of US soybeans and a separate Taiwan firm bought 12,000 tonnes of US soybeans Friday. Traders see a slight reduction for the final crop production report from the USDA on Wednesday. However, traders see tightening ending stocks for the US and world supply demand reports due to strong US exports and lower Argentina soybean production. US ending socks are expected to decline by about 10 million bushels from 165 million posted in December. Meal was under pressure and traders see continued strong exports of meal out of India as a negative force. The Commitments of Traders reports as of January 4th for Soybeans showed Non-Commercial traders were net long 172,186 contracts, a decrease of 14,426 contracts for the week and the selling trend is seen as a short-term negative force. Commodity Index traders held a net long position of 196,146 contracts, up 1,075 contracts for the week. For meal, Non-Commercial traders were net long 43,558 contracts, up 1,008 contracts for the week. Non-Commercial and Nonreportable combined traders held a net long position of 69,349 contracts, up 3,813 contracts for the week and the buying trend is seen as positive. For soybean oil, Non-Commercial traders were net long 66,746 contracts, an increase of 2,249 contracts for the week. Commodity Index traders held a net long position of 108,324 contracts, up 1,544 contracts for the week.

TODAY’S GUIDANCE: Argentina crop conditions look to deteriorate this week and if there is no relief for next week, the market is in a position to move higher. Futures remain overbought and vulnerable to fund trader selling ahead of the USDA reports but the reports are likely to be neutral to supportive for prices. There is no room in the balance sheets for Argentina production problems and it will be difficult to ration demand if Argentina crop is small. In addition, November soybeans need to move higher to attract more acres.

TODAY’S MARKET IDEAS: March soybeans short-term support is at 1365 today with better support at 1355 and 1323. Resistance is at 1378 3/4 and 1390 1/2. A move through resistance leaves 1427 1/2 as short-term upside objective. March oil is still under the negative technical influence of the key reversal on January 3rd and remains very overbought but tightening vegoil supplies continue to support. A resumption of the uptrend leaves 60.16 as next upside target but we can not rule out a more significant correction short-term with 55.02 and 53.77 as key support. November soybean support is 1277 1/2 with 1325 3/4 as next objective.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: A continued stressful weather outlook in Argentina appears to be the main force to support the market overnight. Strength in the US dollar yesterday sparked a significant set-back off of the highs. Argentina looks dry into the weekend and then there is some scattered rains for the northeastern areas for Saturday and Sunday before dry and sometime very hot conditions return for next week. Some areas may see temperatures into the 100′s and this may have provided some underlying support as parts of the region are already seeing stressful growing conditions. Traders await news on weekly export sales today and there is also much interest in the potential release of a CFTC report regarding position limits for speculators. The China government is fighting inflation and traders remain somewhat nervous over the potential for further monetary tightening measures. However, the move to cap soyoil prices has caused crushing plant margins to suffer which could cause the supply flow of vegetable oils to slow as well and the tighter supply may put upward pressure on prices. The China Ministry of Commerce indicated this week that edible oil retail prices rose.4% for the week ending December 12th. On Friday, China’s key producing province will auction off 191,000 tonnes of soybeans which did not receive any bids last week. The central government reserves of 296,300 tonnes did not receive any bids on Tuesday. The National Grain and Oil Information Center in China pegged the soybean crop at 15.2 million tonnes, up 1.5% from last year. The USDA believes China will import 57 million tonnes for the 2010/11 season and private forecast are as high as 60 million tonnes as compared with imports of 50.34 million last year and 41.1 million tonnes for the 2008/09 season. January soybeans closed slightly higher yesterday but 18 1/4 cents off of the highs. Traders said that the burst of buying came on the strong export outlook for US soybeans which was bolstered by the USDA’s announcement of a sale of 110,000 tonnes of US soybeans to China. In addition, concerns for dry weather forecasts for parts of Argentina helped to support the market. Meal also surged to start the day, gaining sharply on soy oil. Talk of better feed demand due to cold weather helped support meal while oil ran into profit-taking and selling by spreaders following the move to contract highs for the March contract. For weekly export sales, traders are looking for soybean sales of up to 850,000 tonnes. This would be down from a combined total of 870,800 tonnes last week, but well above the weekly average of 239,200 tonnes that is needed each week to reach the 2010/11 export projection from the USDA.

TODAY’S GUIDANCE: Dry weather in the forecast for Argentina may be all that the market needs to dismiss the bearish influences of outside market forces as long as there are no major changes in speculative position limits from the CFTC update today. Declining supply of palm oil plus the potential for a tightening supply of vegoil in China appear to be supportive forces as well.

TODAY’S MARKET IDEAS: January soybean close-in support is at 1293 and 1282 1/2 with 1317 1/2 and 1348 1/2 as next resistance. Keep 1414 as a longer-term upside objective. March Oil experienced a key reversal yesterday so position traders might want to wait for a set-back to at least 53.15 before attempting to buy. The close back over 346.70 for March meal is a positive development but the market needs a close over 351.10 to expect a resumption of the uptrend. November 2011 soybean buying support is at 1208 with 1273 1/2 and 1338 3/4 as next upside objective.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: The market was moderately higher in the overnight session but news of continued tightening measures by China was enough to spark some long liquidation selling and a move from a peak of 1256 for January soybeans back to 1227, 15 lower on the day. Metals and energy markets also pushed from higher to lower and US equity markets pushed lower. Dry weather is beginning to become a bigger concern for western Argentina growing areas and while there is some rain in the forecast for the next several days, the 6-10 day is still calling for below normal rains and warming temperatures. Given the set-back in ending stocks for the US and the fact that Brazil early planted areas were not planted on time, US exports could remain strong for 3-4 weeks next year before the South America harvest hits. It is still early in the growing season but there is less room for error with a tighter than expected US ending stocks situation. Soybean oil futures volume hit a record high on Wednesday. The CME Group raised margin requirements for soybeans and soybean oil which is sometimes seen as a negative force. Indonesia officials are considering raising the export tax on palm oil again to 12.5% in December from 10% now. This might help boost demand for soybean oil and discourage palm exports. Hong Kong authorities are said to be on alert after the first case of bird flu was reported in seven years. Traders remain concerned that China will take measures to fight inflation such as interest rate hikes and China is expected to sell soybeans and vegetable oils from reserves beginning next week. January soybeans closed sharply higher and near the highs of the day yesterday. Traders crediting the gains to a lower dollar and higher crude, along with sharp rallies in an array of commodity and equity markets. Funds returned to the buy side in soybeans after being sellers late last week and into the start of this week. This week’s Export Sales report showed net sales for soybeans at over 1 million tonnes for the 7th time in 9 weeks. As of November 11th, cumulative soybean sales stand at 72.0% of the USDA forecast for 2010/2011 versus a 5 year average of 51.2%. Net meal sales came in at 198,200 tonnes which pushed cumulative sales to 44.0% of the USDA forecast for 2010/2011 versus a 5 year average of 32.3%. Net oil sales were 63,300 tonnes which pushed cumulative sales to 58.7% of the USDA forecast for 2010/2011 versus a 5 year average of 23.0%.

TODAY’S GUIDANCE: November 2011 soybeans held support in the 1133-1091 zone and appear poised for a resumption of the uptrend. Close-in support today is at 1135 1/2 and 1127 with 1167 1/2 and 1187 3/4 as resistance. A close above resistance leaves 1338 as next upside target.

TODAY’S MARKET IDEAS: January soybean resistance is at 1261 3/4 which is a 50% correction of the November break. A close under 1241 might be seen as a short-term negative factor and open the door for additional selling next week; perhaps down to 1144 support.