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Soybeans: Look for Market To Build Weather Premium This Week

by Terry Roggensack on July 19, 2011

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NEAR-TERM MARKET FUNDAMENTALS: The market is seeing buying support overnight from threatening weather forecasts for much of the Midwest and delta growing areas and from a more positive tilt to outside market forces. Weather becomes more critical for soybean yield potential into early August but crop conditions are already deteriorating and traders see further deterioration this coming week. Traders expected to see crop conditions drop about 1% to in the good to excellent category for the weekly update. However, the report showed that 64% of the crop is now rated good/excellent compared to 66% last week and 67% last year. Argentina food and animal health inspectors are on strike this week which could disrupt exports of grains. This should not be a major factor unless the strike is extended beyond this week. November soybeans closed just slightly lower on the session yesterday and closed well up from the early lows. Weather concerns persist and there was talk that the weather models were a little drier and hotter which helped support. Yield uncertainties persist to help support and traders see harsh weather for this week for the Midwest and the delta as supportive. Weekly export inspections came in 3.7 million bushels which was below expectations. Inspections need to average 12.2 million bushels per week for the rest of the season to reach the USDA projection. The USDA supply/demand outlook is already tight and any reductions in the yield outlook could have a significant impact on the price outlook. The USDA currently projects ending stocks for the 2011/12 season at just 175 million bushels which is 5.3% of usage. If average yield drops 1 bushel per acre to 42.4, ending stocks slip to 100 million or 3.1% of usage. If we see a 2 bushel drop to 41.4 million, ending stocks slip to just 26 million, less than 1% of usage.

TODAY’S GUIDANCE: The hot and mostly dry outlook for the next several days with relief in the form of good rains expected for just the northern sections of the corn belt this week and to the east next week appears threatening enough to help support additional weather premium for the key reproductive period of the crop into August. Look for the market to build weather premium this week.

TODAY’S MARKET IDEAS: Support for November soybeans comes in at 1391 and 1380 with 1411 1/4 and 1450 3/4 as next upside targets. December soyoil support is at 57.99 and 57.47 with 58.71 and 60.22 as next resistance.

Soybeans: Follow Wheat Down or Corn Up?

by Terry Roggensack on June 22, 2011

NEAR-TERM MARKET FUNDAMENTALS: A sluggish world demand tone and weakness in wheat are negative forces today as the market gave back a good portion of yesterday’s gains in overnight action. Traders see the market in need of warmer and drier weather and a hot and dry outlook into the 4th of July weekend is bringing mixed reviews. Palm oil production is expected to climb in the second half of 2011 and stocks are expected to rise above the 16-month high of 1.92 million tonnes posted last month. Indonesia will raise export taxes in July which is expected to boost exports from Indonesia for the remainder of this month and slow exports from Malaysia. Feed companies in China consumed 35 million tonnes of meal last year which was up 13% from 2009. Higher pork prices this year are expected to encourage increased feed usage for the coming year and with high corn prices, meal demand should remain strong. The market managed to recover from a mid-session set-back yesterday to close moderately higher on the session. New crop found some support from a little more threatening weather for early July and strength in corn and the US stock market also helped. The outlook for a hot and dry ridge to move into the western Corn Belt for the 4th of July weekend plus weakness in the US dollar and strength in other commodity markets and equity markets helped support the higher trade early in the session. Talk of the oversold condition of the market after a 7-session break of 86 1/2 cents into Friday’s lows added to the positive tone. The weekly crop updates did not bring any surprises with 94% of the crop planted as of Sunday and 82% of the crop emerged from 86% as the 5-year average. The crop is rated 68% in good to excellent condition which was up 1% from last week and unchanged from the 10-year average. A positive tone to edible oil prices due to higher palm futures and continued talk of tighter supply from Europe due to spring drought and damage to the Canadian crop due to too much rain were seen as factors to support soybean oil. However, the sharp break in palm oil overnight helped push July soybean oil under yesterday’s lows in overnight action.

TODAY’S GUIDANCE: The soybean market seems undecided on whether to follow wheat lower or corn higher. The weather outlook is seen as bearish by some traders and this may be the case if there is just a few days of hot and dry weather but the models suggests a strong high pressure ridge with 95-100 degrees across a good portion of the corn belt in the 6-10 and 11-15 day forecast models. An extended ridge pattern should be considered bullish as corn damage will be possible if the heat lasts into July. The market needs a high yield this year to avoid significant tightness and the forecast opens the door for the market to begin to build a weather premium.

TODAY’S MARKET IDEAS: The technical action is weak and November soybeans close in support will need to hold at 1339 3/4 or the market looks vulnerable to another swing down to the 1320 level. Look for support to hold on a closing basis. A move over 1358 1/2 and especially 1367 3/4 will put the market back on a bull track with 1433 3/4 as next upside target.

Soybeans: Limited Old Crop Upside with Higher Ending Stocks Expected

by Terry Roggensack on June 2, 2011

NEAR-TERM MARKET FUNDAMENTALS: Fund trader buying emerged to support a strong recovery yesterday and the market inched higher in overnight trade. While the US weather looks favorable for planting, adverse weather for Canada and to some extent China has traders uncomfortable in assuming a strong oilseed crop this season. The USDA attache in China believes that soybean imports for the 2011/12 season will reach 58 million tonnes from 54.5 million this year. Production is expected to slip to 14.4 million tonnes from 15.2 million this season. Private traders still see the 54.5 million tonnes this year as too high and there is talk that many traders are adjusting old crop ending stocks higher for the June supply/demand report next week. Brazil meal exports reached 1.5 million tonnes for May from 1.2 million in April and from 1.4 million last year. Oil exports reached 165,000 tonnes from 59,000 April and 102,000 last year. A late spurt of buying from fund traders helped support solid gains yesterday and the highest close for November soybeans since April 25th. Weakness in outside market forces and in wheat helped to pressure the market early as traders see better weather for planting in the US and some significant rains into the weekend for Europe as negative forces. However, the slow plantings pace for soybeans and a bounce in corn and meal helped support the market to trade higher. A private firm released a US soybean planted acreage estimate of just 74.89 million acres and this might have helped support the market late in the day. If we plug in this estimate to the supply/demand table and leave the rest of the USDA numbers from May unchanged, US ending stocks come in at 87 million bushels as compared with the USDA estimate of 160 million for the 2011/12 season. Planting progress last week was lower than expected at just 51% complete compared to 71% last year. Only 7% of the Ohio crop is planted and just 29% is planted in North Dakota but Iowa is already 87% complete. Ideas that fund traders may emerge as buyers of commodity markets during early June also helped to provide some support.

TODAY’S GUIDANCE: The weather news was a short-term negative force for grains yesterday but the market shrugged off this news and closed strong. After another 6-8 days of dry and sometimes hot weather in the Midwest, the extended forecast models suggest a shift back toward more seasonal weather. The upside for old crop looks limited by expectations for higher old crop ending stocks in next week’s report.

TODAY’S MARKET IDEAS: November soybean short-term support moves up to 1365 1/2 and then 1349 1/4 with 1393 1/2 and 1458 1/2 as next objectives. December soybean oil is showing good resistance near 60.08 but support at 59.27. Additional resistance is at 60.51.

Soybeans: Weather and Renewed Fund Buying Supports

by Terry Roggensack on May 19, 2011

NEAR-TERM MARKET FUNDAMENTALS: Like corn, the soybean market saw a noted increase in fund buying interest yesterday in what seemed to be a reawakening of the physical commodity markets. While the inflationary vibe this morning doesn’t appear to be as significant as the environment yesterday, the combination of residual gains in energy prices, a weaker Dollar and residual weather concerns give the bull camp more ammunition than the bear camp to start today. While rising soybean oil production views served to restrain the gains in the Asia action overnight, those markets also saw talk of increased oil demand overnight. However, the focus in the US soybean trade is likely to return to the adverse planting season weather in the US and perhaps on renewed interest or the lack of follow through buying interest from the funds. Some areas will see some planting activity today and that could continue ahead of the next weather system that is seen developing over the coming 36 hours. While the corn market probably sees Thursday and Friday US weather as very important, the soybean market might be looking ahead to the threat of rain next week, as the critical window for soybean plantings is starting to take on more significance. Export sales for Soybeans are expected to be moderately stronger than last week and overnight the trade saw a 60,000 ton purchase of Brazilian beans by a Taiwanese entity. The soybean oil trade will be watching the weather for a rain threat this weekend that might slow the recent progress in the Canadian rapeseed area.

TODAY’S GUIDANCE: The July soybean contract comes into the early Thursday US action sitting just above the 100 day moving average of $13.84 1/2. With some rain seen in the coming 36 hours and another wet and cold system projected for early next week, the bull camp looks to retain the edge. So far, short term technical indicators aren’t over wound but one could suggest that the fundamental track is moving to factor in fairly significant overall acre losses and therefore the weather will have to avoid offering up a noted dry window. We get the sense that bullishness on the weather is set to reach a zenith into the Friday close, as temperatures are starting to rise and that might allow for crop work unless rain fall totals remain robust.

TODAY’S MARKET IDEAS: November soybeans managed to rise above the 100 day moving average yesterday and the market sits entrenched above that level in the early Thursday trade. While front month corn and wheat have seen comparatively bigger buying interest off the planting delays, minor rains due into Thursday night and into Friday and also early next week could begin to concern traders of tightening in the November soybean contract supply view. Near term upside targeting in July soybeans is at 14.00 with near term support seen at $13.77. July soybean oil support moves up to 57.26 and 57.30, with the 100 day moving average at 57.89 seen as initial resistance.

Soybeans: New Crop Looks to Work Higher

by Terry Roggensack on May 10, 2011

NEAR-TERM MARKET FUNDAMENTALS: A positive tone from the wheat market and firm cash basis levels for soybeans and meal plus expectations for the USDA to keep the balance sheets tight for the supply/demand update in the morning has helped the market recover off of Friday’s lows. China imported 3.88 million tonnes of soybeans in April was up 10.5% from the previous month but still down 7.4% from last year. Total imports for the first four months of the year reached 14.84 million tonnes, down 2.6% from last year’s pace. China sold 89,719 tonnes of rapeseed from state reserves overnight. China edible oil imports for April were just 490,000 tonnes, down 12.5% from last year. India is tendering for 1,500 tonnes of soybean oil. In the US, producer plantings reached 7% complete as of Sunday which was as expected but still down from 28% last year and a 10-year average of 19%. The market closed a bit higher on the session yesterday with solid gains seen for soybean oil but sluggish trade in meal helped cause the market to set-back from the early highs to see July soybeans close 7 cents off of the highs. The surge higher in wheat prices and less negative influence from outside market forces are factors which helped support. Weekly export inspections came in at just 6.0 million bushels which was well below trade expectations and down from 12.7 million bushels needed as an average each week to reach the current USDA projection. There is talk that the USDA could lower their export projection for the supply/demand report this week which would push up ending stocks and help ease tightness concerns. Traders see old crop ending stocks near 155 million bushels from 140 million last month. For the first look at the 2011/12 season, traders see ending stocks near 170 million bushels. Rain in the Canadian Prairies for the first few days of this week could slow planting progress for canola.

TODAY’S GUIDANCE: We see the USDA lowering both export and crush slightly for the report which could result in ending stocks for the 2010/11 season to increase to 165 million bushels from 140 million last month. For the new crop, we see trend yield near 43.4 and ending stocks near 155 million. July soybean support comes in at 1327 3/4 and 1322 1/4 with 1354 1/2 and 1376 1/4 as resistance. November support is at 1320 with 1349 1/4 and 1363 3/4 as resistance.

TODAY’S MARKET IDEAS: July soybean oil support is at 55.82 with 57.20 and 57.92 resistance. November soybeans held support last week and may be in a position to work higher in the next few weeks as the new crop outlook appears supportive for now.

Soybeans: Weak Short-Term Old Crop Demand

by Terry Roggensack on April 27, 2011

NEAR-TERM MARKET FUNDAMENTALS: Ideas that there will be some increased planting for Iowa and western Corn Belt producers into early May plus China demand concerns are factors which helped to pressure the market overnight. China crush margins are still weak and some plants have slowed or halted operations. Traders indicate that soybean stocks at China ports have reached 6.6 million tonnes due to recent slow demand and incoming cargoes. Domestic meal basis levels have improved in recent days but this does not appear to be enough to support. Soybean oil demand appears to be slow. The soybean market continues to experience some liquidation pressures due to China tightening concerns, slow import demand from China and increased flow of Argentina new crop soybeans. This helped pressure soybeans yesterday with talk that the recent three-day rally left the market in a slight overbought condition. Big planting expectations from Canada and weakness in the wheat market plus concerns of a shift in the US to more soybeans and less corn plantings helped to pressure the market. Taiwan is tendering for 23,000 tonnes of US corn and 12,000 tonnes of US soybeans. Palm oil was under some pressure overnight from increased supply estimates. Ideas that the rally early this week was overdone, talk of increasing supply from South America and ideas that the US will see more soybeans planted due to slow corn plantings added to the negative tone. Canadian producers intend to plant 19.225 million acres of canola which would be up 14.3% from last year and is up from trade expectations near 18.5 million. This would be a record high if weather allows producers to get the crop planted. Meal basis levels have improved recently and has helped provide some support but not enough to offset weakness in wheat and fund selling seen in soybeans. Keep in mind; the last COT report showed that trend-following fund traders (non-commercial without index funds) were holding a net long position of near 64,000 contracts. The data was as of April 19th when July soybeans closed at 1354. Open interest has declined on the rally since this date and this suggests short-covering, not new buying, is the foundation for the recent recovery bounce.

TODAY’S GUIDANCE: There does not appear to be enough short-term demand news to offset speculative selling and the market looks vulnerable to more losses. Eventually, the market may be in a position where November soybeans are undervalued; especially if there is no major shift in acres from corn.

TODAY’S MARKET IDEAS: Old crop soybeans may continue to struggle with weak demand and sharp corrective breaks for November soybeans still look like buying opportunities. July soybean short-term selling resistance comes in at 1389 and 1398 3/4 with 1353 as support. Aggressive short-term traders can sell at 1376 1/2 with 1353 objective.

Soybeans: Nov Needs to Move Up To Secure More Acres

by Terry Roggensack on April 1, 2011

NEAR-TERM MARKET FUNDAMENTALS: The market saw a minor set-back overnight with talk of the overbought condition, some concerns with China tightening measures again over the weekend and talk of weak crushing margins in China helping to pressure. While there is still some harvest delays in northern Brazil, a drier trend in southern Brazil and Argentina could keep the harvest active and soybeans and products flowing on the world market.

With a much tighter than expected stocks report for March 1st, and a tighter than normal stocks for on-farm storage, traders will monitor demand factors closely over the near-term. In addition, US and China soybean plantings look to come in lower than last year and it appears that the US yield will need to be up near last years high level or higher in order to avoid significant tightness for the coming year.

The USDA report news yesterday was enough to support the market to a sharply higher close even with continued concerns for more active movement of South American supply onto the world market and a weaker demand tone out of China recently. May soybeans ran up to the 60 cent limit early in the day but traded well off the highs for much of the session. March 1st stocks were pegged at 1.249 billion bushels, about 46 million bushels below trade expectations. Soybean planted acreage was pegged at 76.609 million acres or about 360,000 acres below trade expectations. This is 791,000 acres below last year. If we plug in the new plantings estimate and use a trendline yield of 43.4 bu/acre, ending stocks for the 2011/12 season come in at just 105 million bushels with a stocks/usage of 3.2%, a record low. November soybeans managed to push above the February highs on the early rally and to the highest level since July of 2008.

Weekly export sales for soybeans came in at 144,800 metric tonnes for the current marketing year and 113,000 for the next marketing year for a total of 257,800. Sales were considered well below expectations. Cumulative soybean sales stand at 93.3% of the USDA forecast for the season versus a 5 year average of 86.1% sold for this time of the year. Old crop sales of 126,000 metric tonnes are needed each week to reach the USDA forecast.

Meal sales came in at 86,500 tonnes which was also below trade expectations. Sales of 79,000 metric tonnes are needed each week to reach the USDA forecast. Oil sales came in at 14,100 metric tonnes which was near the high end of expectations.

Cumulative soybean oil sales stand at 83.6% of the USDA forecast for 2010/2011 (current) marketing year versus a 5 year average of 54.4%. Sales of 8,000 metric tonnes are needed each week to reach the USDA forecast.

TODAY’S GUIDANCE: Traders sense that it will be necessary for soybean values to outpace corn values if there is a chance to pull some acres away from corn to push soybean plantings to a higher level. This would suggest that November soybeans may remain in an uptrend and look set for a run at the next target of 1465. Some sluggish short-term demand factors from China may keep old crop trade choppy for now but surging corn values might help boost meal demand soon.

TODAY’S MARKET IDEAS: For old crop May soybeans, look for some consolidation with key support at 1392 and resistance at 1447. Eventually, strength in new crop and steadier demand should support an upside break-out and 1542 as next objective. December oil key support is at 58.35 with 64.16 as a longer-term objective.

Soybeans: Need Big Planted Acreage to Avoid Tightness

by Terry Roggensack on March 29, 2011

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.

Soybeans: Idea that Market is Oversold and Needing More Acres Supports

by Terry Roggensack on March 18, 2011

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.

Soybeans: USDA To Set The Tone

by Terry Roggensack on March 10, 2011

NEAR-TERM MARKET FUNDAMENTALS: Outside market forces are quite negative this morning and traders see the possibility of some negative news from the USDA. The supply/demand results this morning could influence trade but after the sharp break of the past four trading sessions, it may take some very negative results to cause further weakness. Traders see the possibility of a higher Brazil crop estimate and a possible adjustment lower in China import demand as reasons to suspect that US ending stocks might come in a little higher than last month. World ending stocks should also increase with traders looking for an increase of near 1 million tonnes from 58.21 million posted in February. China imported just 2.32 million tonnes of soybeans in February which was down 21% from last year and down 54.9% from January. January-February combined imports are at 7.45 million tonnes, up 6.1% from last year. Traders expect a recovery for March. The USDA attache from China believes that imports for the 2011/12 season will reach 58 million tonnes, up 5.5% from this season. An expanding livestock herd and continued growth in edible oil consumption are reasons for the increased imports. May soybeans closed sharply lower on the session yesterday and pushed to the lowest level since February 25th. Continued concerns that the Brazil and Argentina crop production estimates are increasing due to higher yield expectations provided a bearish influence on the market and helped spark another round of long liquidation selling to drive soybeans sharply lower. This pushed the market to the lowest level since March 1st and funds were noted as active sellers for the second day in a row. Liquidation ahead of the report was active and the selling intensified on the move under Tuesday’s lows. Talk of more rain for the Argentina crop for the coming weekend was also seen as a negative force. Brazil northern areas continue to see hefty rain totals in the forecast and this may be seen as a positive development as unharvested soybeans may be at greater risk to excess moisture issues. Soybean basis at the gulf was said to have jumped 5 cents to 80 cents over for spot delivery as tight supply helped support the higher bids. Traders see weekly export sales for soybeans for release ahead of the opening near 550,000 tonnes.

TODAY’S GUIDANCE: Eventually, the focus is likely to shift to the end of the month reports and with high profitability for corn and cotton compared with soybeans, there is a sense that soybean planted acreage estimates will begin to move down to lower than last year. If so, there will be little room for anything but near record yields to avoid further tightness for next year. If we were to see soybean planted area come down slightly this year to 77.0 million acres and yield at a simple 5-year average of 42.4 bushels per acre, soybean ending stocks would come in at just 43 million bushels for the 2011/12 season. With tight stocks and uncertainty over planted acreage in the US, the downside appears somewhat limited. On negative news for the reports this morning, next support for May soybeans comes in at the 1335 to 1310 zone. On supportive news, 1361 1/2 and 1381 3/4 are next resistance.

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