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NEAR-TERM MARKET FUNDAMENTALS: The market appears somewhat concerned with the potential threat of heat in the southern US growing areas and too much rain in the north to finish plantings and this has helped to provide underlying support. In addition, a major loss of planted acres in Canada due to excessive rains for the planting season helped support the market and supported canola and oat prices this week with talk that canola plantings in Canada could be down 2-3 million acres. The rally in soybeans attracted selling pressure from traders who believe that the US weather is not too threatening with crop conditions already very good and critical weather for the crop not due until late July and into August. November soybeans rallied to the highest level since May 17th into the start of the day session yesterday but prices retreated into early afternoon, trading lower on the day prior to the close. Meal also turned lower during the second half of the session, with the July contract posting a sharp loss on the spread versus July soy oil. July meal also lost ground to the new crop December meal on the sell off. Traders said that a lower dollar helped spark the early rally along with a 2% drop in the good-to-excellent rating for the overall US soybean crop on Monday afternoon’s weekly update from the USDA. Crop conditions may be most vulnerable in the Delta according to one analyst who noted that dry spots are emerging and very hot temperatures are in the long term forecasts. The 6-14 day forecast models from the National Weather Service show above normal temperatures which are centered in southern Illinois by the end of the period. Heat looks to build into the weekend and into the middle of next week.
TODAY’S GUIDANCE: The heat in the forecast is not a negative force for crop conditions as long as there is plenty of moisture. This suggests that Midwest crops will do well with a week or so of hot weather but crops in the delta and far southern Midwest may see some stress. Last weeks USDA supply and demand report pegged 2010/11 soybean ending stocks at 360 million bushels with a yield of 42.9 bushels per acre. “If” weather turns poor and bad enough to pull the yield down to the same level of the 2008/09 crop (39.7 bushels per acre) it could take 2010/11 ending stocks from a somewhat burdensome outlook to just 112 million bushels with a stocks/usage of just 3.6%. Again, this will take a period of poor weather into the late July period but given the market action which suggests old crop supply is not as high as advertised and given the huge net short position of fund traders, we can not rule out the market building some weather premium in the weeks ahead.
TODAY’S MARKET IDEAS: The weak close yesterday pulls short-term support back to 911 1/2 for November soybeans with 925 and 936 3/4 as resistance areas.
Soybean Market Commentary – 2010.06.16
by Terry Roggensack on June 16, 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: The market appears somewhat concerned with the potential threat of heat in the southern US growing areas and too much rain in the north to finish plantings and this has helped to provide underlying support. In addition, a major loss of planted acres in Canada due to excessive rains for the planting season helped support the market and supported canola and oat prices this week with talk that canola plantings in Canada could be down 2-3 million acres. The rally in soybeans attracted selling pressure from traders who believe that the US weather is not too threatening with crop conditions already very good and critical weather for the crop not due until late July and into August. November soybeans rallied to the highest level since May 17th into the start of the day session yesterday but prices retreated into early afternoon, trading lower on the day prior to the close. Meal also turned lower during the second half of the session, with the July contract posting a sharp loss on the spread versus July soy oil. July meal also lost ground to the new crop December meal on the sell off. Traders said that a lower dollar helped spark the early rally along with a 2% drop in the good-to-excellent rating for the overall US soybean crop on Monday afternoon’s weekly update from the USDA. Crop conditions may be most vulnerable in the Delta according to one analyst who noted that dry spots are emerging and very hot temperatures are in the long term forecasts. The 6-14 day forecast models from the National Weather Service show above normal temperatures which are centered in southern Illinois by the end of the period. Heat looks to build into the weekend and into the middle of next week.
TODAY’S GUIDANCE: The heat in the forecast is not a negative force for crop conditions as long as there is plenty of moisture. This suggests that Midwest crops will do well with a week or so of hot weather but crops in the delta and far southern Midwest may see some stress. Last weeks USDA supply and demand report pegged 2010/11 soybean ending stocks at 360 million bushels with a yield of 42.9 bushels per acre. “If” weather turns poor and bad enough to pull the yield down to the same level of the 2008/09 crop (39.7 bushels per acre) it could take 2010/11 ending stocks from a somewhat burdensome outlook to just 112 million bushels with a stocks/usage of just 3.6%. Again, this will take a period of poor weather into the late July period but given the market action which suggests old crop supply is not as high as advertised and given the huge net short position of fund traders, we can not rule out the market building some weather premium in the weeks ahead.
TODAY’S MARKET IDEAS: The weak close yesterday pulls short-term support back to 911 1/2 for November soybeans with 925 and 936 3/4 as resistance areas.
Tags: Beanoil, Grains, Soybeans, Soymeal
About Terry Roggensack