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NEAR-TERM MARKET FUNDAMENTALS: While soybean ending stocks came in a bit tighter than expected for yesterday’s USDA update, the market still faces higher supply ahead and record crop production from South America. South America weather seems to be improving and the Brazil government crop estimate for soybean production is up at 66.7 million tonnes as compared with the USDA at 66 million yesterday, 65 million in January and 63 million in December. All are record highs and compare with 57 million last year. Argentina production is expected at 53 million tonnes, up 21 million for last year. The surge in production could be one reason to suspect that total usage of soybeans in the US could slip lower for the 2010/2011 season. Even if we hold usage and planted acreage unchanged, a trendline yield for the coming season would likely push ending stocks higher. If we assume a 1 million acre increase and a slight reduction in export and crush (both numbers record highs in yesterday’s report) ending stocks could come in well above 325 million bushels. China imports of soybeans in January slipped to 4.08 million tonnes from a record 4.78 million in December. Traders believe that large imports and spreading pig disease led to lower crush margins or even negative crush margins for China crushers by the end of January. The USDA left domestic usage of soybean oil for bio-diesel production unchanged from last month in the February update at 2.2 billion pounds but many traders believe this could improve as the year progresses and increase for next crop season to near 3 billion as compared with total usage at 19.16 billion pounds. Oil again gained sharply on meal yesterday, taking that spread to the most extreme advantage for oil since May 2009 in terms of the contract value difference for the March futures contracts. Positive policy steps taken recently with regard to the bio-diesel mandate and Russia’s banning of poultry meat imports from the US are factors which may have supported the spread. The USDA lowered US soybean ending stocks to 210 million bushels from 245 million last month. Traders had been looking for number near 217 million. Exports were increased by 25 million bushels and the US crush was raised by 10 million. World soybean ending stocks were left near unchanged at 59.73 million tonnes, up 43% from last year and up to the second highest level in history. This pushes the world stocks/usage to 25.4% as compared with 18.7% last year and 23.1% the previous season.
TODAY’S GUIDANCE: We were hoping for a better bounce to sell.
TODAY’S MARKET IDEAS: Selling resistance for May soybeans moves down to 945 with 921 1/2 as first support. Use 894 1/2 as next downside objective. July Meal selling resistance is at 267.30 with 255.80 as next objective. Buying support for July oil is at 38.47 with 40.38 as next objective.
Soybean Market Commentary – 2010.02.10
by Terry Roggensack on February 10, 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: While soybean ending stocks came in a bit tighter than expected for yesterday’s USDA update, the market still faces higher supply ahead and record crop production from South America. South America weather seems to be improving and the Brazil government crop estimate for soybean production is up at 66.7 million tonnes as compared with the USDA at 66 million yesterday, 65 million in January and 63 million in December. All are record highs and compare with 57 million last year. Argentina production is expected at 53 million tonnes, up 21 million for last year. The surge in production could be one reason to suspect that total usage of soybeans in the US could slip lower for the 2010/2011 season. Even if we hold usage and planted acreage unchanged, a trendline yield for the coming season would likely push ending stocks higher. If we assume a 1 million acre increase and a slight reduction in export and crush (both numbers record highs in yesterday’s report) ending stocks could come in well above 325 million bushels. China imports of soybeans in January slipped to 4.08 million tonnes from a record 4.78 million in December. Traders believe that large imports and spreading pig disease led to lower crush margins or even negative crush margins for China crushers by the end of January. The USDA left domestic usage of soybean oil for bio-diesel production unchanged from last month in the February update at 2.2 billion pounds but many traders believe this could improve as the year progresses and increase for next crop season to near 3 billion as compared with total usage at 19.16 billion pounds. Oil again gained sharply on meal yesterday, taking that spread to the most extreme advantage for oil since May 2009 in terms of the contract value difference for the March futures contracts. Positive policy steps taken recently with regard to the bio-diesel mandate and Russia’s banning of poultry meat imports from the US are factors which may have supported the spread. The USDA lowered US soybean ending stocks to 210 million bushels from 245 million last month. Traders had been looking for number near 217 million. Exports were increased by 25 million bushels and the US crush was raised by 10 million. World soybean ending stocks were left near unchanged at 59.73 million tonnes, up 43% from last year and up to the second highest level in history. This pushes the world stocks/usage to 25.4% as compared with 18.7% last year and 23.1% the previous season.
TODAY’S GUIDANCE: We were hoping for a better bounce to sell.
TODAY’S MARKET IDEAS: Selling resistance for May soybeans moves down to 945 with 921 1/2 as first support. Use 894 1/2 as next downside objective. July Meal selling resistance is at 267.30 with 255.80 as next objective. Buying support for July oil is at 38.47 with 40.38 as next objective.
Tags: Grains, Soybean Oil, Soybeans, Soymeal, Soyoil
About Terry Roggensack