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NEAR-TERM MARKET FUNDAMENTALS: Soybeans went on a tear yesterday and that continued overnight. Traders indicate that the recent drop in the dollar and a sharp downward revision in the Argentine soybean crop by the Buenos Aires Grains Exchange yesterday have replaced fears of Chinese cancellation of soybean purchases. It also seems to have superseded concerns over the swine flu outbreak. Traders and analysts say that the market is taking a wait-and-see attitude with regard to the outbreak, and one analyst pointed out the mixed messages that the market is hearing about the outbreak. On the one hand, the virus is spreading to more and more countries, confirming fears about how communicable it is. On the other hand, health experts say that the US has ample supplies of antiviral and antibacterial drugs to fight the disease and the infections that it may cause in sick people. Some experts are also indicating that this virus is less virulent than the bird flu virus. Yesterday, the Buenos Aires Grains Exchange sharply lowered its estimate of this year’s soybean crop to just 34 million tonnes versus last week’s estimate of 36.2 million. This was considered very supportive, and funds were heavy buyers in soybeans and meal yesterday to help power the price advance. Brazil’s ambassador to Malaysia said yesterday that his country can continue to expand palm oil production on 3.5 million hectares of open land near the Amazon rainforest. The USDA announced a sale of 100,000 tonnes of US soybeans to an unknown destination for 2009/10 delivery and some traders believed the buyer to be China. The USDA will release its weekly export sales numbers this morning and traders are looking for up to 1 million tonnes of soybean sales. Today is first notice day for deliveries against May futures contracts. Soybeans deliveries were 89 contracts, Meal deliveries were zero and oil deliveries were 4,800 contracts. Oil was near the high end of the range of trade expectations. Meal was in line. Some traders had been looking for zero deliveries in soybeans, but today’s number is still about in line with expectations.
WEATHER: The US weather forecast is much the same as yesterday. Rains are expected across a wide swath of the Midwest today with locally heavy amounts of 1-2 inches. This should be focused tomorrow along a band running from Missouri through Illinois and Indiana into northern Ohio. The southern Midwest may see further rains on Sunday with a back-and-forth rain system hitting much of the Midwest from Monday through at least the middle of next week. Rain and snow is expected in the northern Plains today with rains also hitting the central and SE Plains. The northern Plains should then clear with the southern Plains getting coverage on-and-off into the middle of next week.
TODAY’S GUIDANCE: Concerns over possible cancellations of soybean sales to China on Tuesday were mostly forgotten on Wednesday as funds poured into all of the grain markets. Bullish sentiment was bolstered by a sharply reduced estimate of the Argentine soybean crop by the Buenos Aires Grains Exchange, and a 100,000 tonne sale to unknown destinations yesterday that was widely believed to be to China. A lower dollar and higher equities were also supportive. Export sales will be out this morning and that may give us added insight to the China situation, but the focus of the market should remain on the world’s shrinking marketable surplus of soybeans unless the swine flu outbreak takes a dramatic turn for the worse. Yesterday may have reignited the rally in open interest that has carried the soybean market higher since early March. First support is at 1011 1/2 in July soybeans this morning with the next support at 1001 1/2. Resistance is at 1050 and at 1064 1/2.
