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NEAR-TERM MARKET FUNDAMENTALS: A move by China’s central bank to tighten liquidity overnight helped to spark aggressive selling in many commodity markets and also supported a sharp rally in the US dollar. Traders also see improving weather conditions in Brazil as a bearish force for the near-term as some of the wet areas are drying and steady rains in other areas are helping to support improving crop conditions. In fact, the official Brazil crop estimate for soybeans this morning was at 65.16 million tonnes as compared with 64.56 million from December and 57 million tonnes last year. In last months USDA world supply/demand report, Brazil soybean production was pegged at just 63 million tonnes so traders will expect a revision higher in January update set for release on Tuesday. Traders also see the possibility that the final US production forecast for 2009 could be revised higher by 50-100 million bushels due to better yield. Keep in mind, even without the potential for adjustments higher in production, world ending stocks for the 2009/10 season from last months USDA update showed an increase of 34.6% and US ending stocks up 84.8%.
Funds were noted sellers yesterday and the potential tightening of liquidity in China could also cause China buyers to step away from new purchases over the near-term. Traders said that they were concerned over China’s decision to require import licenses for soybeans which was considered somewhat negative. China is expected to switch over to buying South America soybeans in coming weeks with physical shipment of South American soybeans coming in March and April. Traders are also looking at the soybean/corn ratio with the idea that the ratio may need to move further in favor of corn early this year in order to bring a shift of acres into corn that some analysts believe is needed. Argentina’s soybean crop saw additional scattered rains over the past few days with some local totals of up to 1 1/2 inches. Dry weather is expected in most areas of the Argentine soybean belt through the weekend with scattered rains resuming early next week. In Brazil, light rain fell in Rio Grande do Sul over the past 24 hours with heavier rains forecast for the states of Rio Grande do Sul and Parana today and again on the weekend.
TODAY’S GUIDANCE: Once the early-in-the-year fund buyers are finished building their net long positions, we see a period of 3-5 weeks in which: 1) US producers become more aggressive sellers in the cash market, 2) South American producers sell soybeans out of the field, 3) China buyers slow bookings and some even cancel previous orders, 4) the soybean market may need to absorb a jump of near 100 million bushels in production due to higher yield adjustments for the US 2009 crop and 5) end user buying slows as buyers wait and see if South American production drives prices lower. These factors could spark selling from trend-following funds and small speculators who hold significant net long positions. In addition, the jump in the dollar and China credit tightening are factors which could spark more selling. March soybean selling resistance is at 1050 1/2 with 1033 1/2 and 1023 3/4 as next support levels. Key uptrend channel support is at 1011 1/2 today and a move under this level would turn the chart pattern quite bearish. March meal selling resistance is at the 307.90 to 309.90 zone with 295.80 as first downside target.
TODAY’S MARKET IDEAS: We like the idea of establishing short positions for May and July soybeans due to burdensome supply possibilities but we were unable on the bounce yesterday.
Soybean Market Commentary – 2010.01.07
by Terry Roggensack on January 7, 2010
Below is a sample of our 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 move by China’s central bank to tighten liquidity overnight helped to spark aggressive selling in many commodity markets and also supported a sharp rally in the US dollar. Traders also see improving weather conditions in Brazil as a bearish force for the near-term as some of the wet areas are drying and steady rains in other areas are helping to support improving crop conditions. In fact, the official Brazil crop estimate for soybeans this morning was at 65.16 million tonnes as compared with 64.56 million from December and 57 million tonnes last year. In last months USDA world supply/demand report, Brazil soybean production was pegged at just 63 million tonnes so traders will expect a revision higher in January update set for release on Tuesday. Traders also see the possibility that the final US production forecast for 2009 could be revised higher by 50-100 million bushels due to better yield. Keep in mind, even without the potential for adjustments higher in production, world ending stocks for the 2009/10 season from last months USDA update showed an increase of 34.6% and US ending stocks up 84.8%.
Funds were noted sellers yesterday and the potential tightening of liquidity in China could also cause China buyers to step away from new purchases over the near-term. Traders said that they were concerned over China’s decision to require import licenses for soybeans which was considered somewhat negative. China is expected to switch over to buying South America soybeans in coming weeks with physical shipment of South American soybeans coming in March and April. Traders are also looking at the soybean/corn ratio with the idea that the ratio may need to move further in favor of corn early this year in order to bring a shift of acres into corn that some analysts believe is needed. Argentina’s soybean crop saw additional scattered rains over the past few days with some local totals of up to 1 1/2 inches. Dry weather is expected in most areas of the Argentine soybean belt through the weekend with scattered rains resuming early next week. In Brazil, light rain fell in Rio Grande do Sul over the past 24 hours with heavier rains forecast for the states of Rio Grande do Sul and Parana today and again on the weekend.
TODAY’S GUIDANCE: Once the early-in-the-year fund buyers are finished building their net long positions, we see a period of 3-5 weeks in which: 1) US producers become more aggressive sellers in the cash market, 2) South American producers sell soybeans out of the field, 3) China buyers slow bookings and some even cancel previous orders, 4) the soybean market may need to absorb a jump of near 100 million bushels in production due to higher yield adjustments for the US 2009 crop and 5) end user buying slows as buyers wait and see if South American production drives prices lower. These factors could spark selling from trend-following funds and small speculators who hold significant net long positions. In addition, the jump in the dollar and China credit tightening are factors which could spark more selling. March soybean selling resistance is at 1050 1/2 with 1033 1/2 and 1023 3/4 as next support levels. Key uptrend channel support is at 1011 1/2 today and a move under this level would turn the chart pattern quite bearish. March meal selling resistance is at the 307.90 to 309.90 zone with 295.80 as first downside target.
TODAY’S MARKET IDEAS: We like the idea of establishing short positions for May and July soybeans due to burdensome supply possibilities but we were unable on the bounce yesterday.
Tags: Grains, Soybeans
About Terry Roggensack