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NEAR-TERM MARKET FUNDAMENTALS: A turn up in the stock market late yesterday and a rally in energy markets along with some weakness in the US dollar was enough to spark strong gains in soybeans and products overnight but traders see the upside limited by a favorable weather forecast and a continued flow of new crop soybeans from South America. While investor confidence in commodity markets may be a bit more stable, many traders see the supply fundamentals as a reason to suspect that investors will shy away from soybeans over the near-term. Mostly dry weather this week with only scattered light rain in the forecast into early next week appears to be near ideal weather to see an aggressive plantings pace and a good start to the crop which was already planted. The collapse in livestock prices in the US does not provide confidence in feed demand and has meal traders a bit nervous. Taiwan bought 58,000 tonnes of soybeans from Brazil. Egypt is tendering for 15,000-20,000 tonnes of soybean oil and the same amount for sunoil. Basis levels for soybeans at the gulf were steady yesterday with talk of slow producer selling. There is also less talk in cash circles about any switching of US and South American cargo bookings. A backdrop of sharply lower crude oil and equities and a sharply higher dollar combined with favorable crop weather helped drive the market lower yesterday. The favorable crop weather in the US is reinforcing ideas that this year’s US soybean yields could be higher than the USDA’s current projection of 42.9 bushels per acre. Last year’s US soybean yield was 44.0 bushels per acre under, cool, wet and nearly ideal conditions. One analyst noted that the cooler forecast for the coming weekend and into next week and the possibility of improved rainfall later next week was particularly favorable in that it would keep the current hot and relatively dry spell from lasting long enough to cause stress to recently planted soybean fields.
TODAY’S GUIDANCE: The lack of bearish outside market forces could allow for a short-term bounce in the market but it will likely take a significant weather threat to see much follow-through to the upside. Ideas that China buying in soybeans might slow in the next few months and a surge higher in available supply from South America are seen as bearish forces. Dry weather in the US this week could cause producers to plant even more soybean acreage that anticipated. Keep in mind, if we see a 1 bu/acre increase in yield from last year, soybean ending stocks could increase to near 525 million bushels from 190 million this year and 138 million last year.
TODAY’S MARKET IDEAS: Rallies would appear to be selling opportunities. Downtrend channel selling resistance for November soybeans comes in at 914 1/4 today with 883 and 875 as next downside objectives. Selling resistance for July soybeans is at 945 3/4 with 895 1/2 as next downside objective.
Soybean Market Commentary – 2010.05.26
by Terry Roggensack on May 26, 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 turn up in the stock market late yesterday and a rally in energy markets along with some weakness in the US dollar was enough to spark strong gains in soybeans and products overnight but traders see the upside limited by a favorable weather forecast and a continued flow of new crop soybeans from South America. While investor confidence in commodity markets may be a bit more stable, many traders see the supply fundamentals as a reason to suspect that investors will shy away from soybeans over the near-term. Mostly dry weather this week with only scattered light rain in the forecast into early next week appears to be near ideal weather to see an aggressive plantings pace and a good start to the crop which was already planted. The collapse in livestock prices in the US does not provide confidence in feed demand and has meal traders a bit nervous. Taiwan bought 58,000 tonnes of soybeans from Brazil. Egypt is tendering for 15,000-20,000 tonnes of soybean oil and the same amount for sunoil. Basis levels for soybeans at the gulf were steady yesterday with talk of slow producer selling. There is also less talk in cash circles about any switching of US and South American cargo bookings. A backdrop of sharply lower crude oil and equities and a sharply higher dollar combined with favorable crop weather helped drive the market lower yesterday. The favorable crop weather in the US is reinforcing ideas that this year’s US soybean yields could be higher than the USDA’s current projection of 42.9 bushels per acre. Last year’s US soybean yield was 44.0 bushels per acre under, cool, wet and nearly ideal conditions. One analyst noted that the cooler forecast for the coming weekend and into next week and the possibility of improved rainfall later next week was particularly favorable in that it would keep the current hot and relatively dry spell from lasting long enough to cause stress to recently planted soybean fields.
TODAY’S GUIDANCE: The lack of bearish outside market forces could allow for a short-term bounce in the market but it will likely take a significant weather threat to see much follow-through to the upside. Ideas that China buying in soybeans might slow in the next few months and a surge higher in available supply from South America are seen as bearish forces. Dry weather in the US this week could cause producers to plant even more soybean acreage that anticipated. Keep in mind, if we see a 1 bu/acre increase in yield from last year, soybean ending stocks could increase to near 525 million bushels from 190 million this year and 138 million last year.
TODAY’S MARKET IDEAS: Rallies would appear to be selling opportunities. Downtrend channel selling resistance for November soybeans comes in at 914 1/4 today with 883 and 875 as next downside objectives. Selling resistance for July soybeans is at 945 3/4 with 895 1/2 as next downside objective.
Tags: Grains, Soybean Oil, Soybeans, Soymeal
About Terry Roggensack