Too much rain in the one week outlook might support corn but opens the door for increased soybean planted area and we expect another leg down before the market puts in a seasonal low. The focus of the trade yesterday was on corn and wheat with weather forecasts causing seeding issues. Weakness in soybeans could have been tied to the reality that some marginal corn or wheat acres that struggle to get planted could get switched to soybeans. The 7-day models show 4-7 inches of rain across much of Arkansas, Missouri and much of Illinois and Indiana with 5-12 inches for parts of the region. The open interest in soybeans went down 17,439 contracts on Monday with short covering noted. The soybean planting progress report has soybean plantings at 6% complete compared to 3% last year. Most of the progress is in the Delta region states of Mississippi, Louisiana and Arkansas. With the wet forecast for the weekend into the first week of May, some analysts are already raising soybean acreage estimates at the expense of wheat and corn.
A key Illinois based advisor raised his soybean acreage estimate to 91.0 million acres from the USDA’s 89.5 million. This would be a 7.6 million increase over last year. Using 91.0 million acres with a trendline yield of 48.0 bushels/acre (which is down 8.5% from last year’s 52.1), ending stocks swell to 710 million bushels, and this is while using a generous demand base of 1.945 billion bushel crush and 2.000 billion bushel exports for this example. The highest ending stocks figure ever was 574 million bushels in 2006-07 when November soybeans traded below $7.00. The fundamental set-up for the new crop season is extremely bearish and it will take a major weather issue to avoid record US ending stocks. China’s March soybean imports came in at 6.32 million tonnes up 3.7% from last year. The US received 66.7% of the business for the month. For the first three months of the year, China has bought 19.52 million tonnes of soybeans, up 20% from last year with the US providing 15.42 million tonnes of this total.
TODAY’S MARKET IDEAS: July soybeans need to see a trade above the 972 1/2 level soon, otherwise the bear camp will take control. The slow stochastics are getting a bit overbought and are starting to roll over. Another failure against close-in resistance at 972 1/2 will open up for a possible test of the downside target at 929 1/2. Close-in resistance in July soybeans is seen at 968 1/4 followed by 972 1/2. The downside target remains at 929 1/2.