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NEAR-TERM MARKET FUNDAMENTALS: Traders said that outside markets and generally favorable crop weather sent the complex lower overnight. A shift in the longer term weather forecast has taken out the hot air dome that some had expected to settle over the corn and soybean belt during the last week of June and early July. Instead, forecasts call for normal to slightly above normal temperatures with continued rain over the shorter term centering on NW growing areas. The Commitments of Traders Report for the week ending June 16th featured very heavy net selling by trend following funds in soybeans and soy oil which added to the negative tone. In Soybeans, index funds were net buyers of 1,680 contracts while trend-followers were net sellers of 10,652. In soybean oil, index funds were net buyers of 3,594 contracts while trend-following funds were net sellers of a whopping 20,433 contracts. This pushed the trend followers over to a net short position of 13,510. In meal, large non-commercial traders were net sellers of just 163 contracts to maintain their large net long position at over 54,000 contracts. China plans to scrap export taxes on soybeans, wheat and rice after July 1st. This is part of a general loosening policy that has been discussed in recent weeks by various officials and think tanks. It has included the idea that China might begin to sell some of its strategic reserve of corn, possibly by July and more likely by August. Malaysian palm oil exports for June 1-20 fell 4.1% from a similar period in May. Ideas that producers might have planted 2-4 million “extra” acres above the March intensions report, weakness in outside markets and China demand uncertainties are factors which helped pressure.
WEATHER: Rain continued through the weekend from the NW corn and soybean belt into the north central Midwest. The next three days are expected to bring added rain with the heaviest amounts centered on northern Iowa and southern Minnesota and more moderate amounts blanketing the rest of Iowa, all of Wisconsin and the NW corn and soybean belts as well as much of Illinois and Indiana and on into parts of Kentucky and Tennessee. Ninety degree temperatures are expected today in all of the western Corn Belt and most of the NW as well as most of Illinois and the mid south and all of the Delta. The hot weather is expected to shift gradually east tomorrow and cover all of the Midwest by Wednesday. Longer term forecasts have largely eliminated the possibility of a hot weather “dome” over major growing areas.
TODAY’S GUIDANCE: Outside markets and a sharp sell off in corn overnight helped to push the November soybean contract below last week’s lows and extend the break in meal and old crop soybeans. However, weakness in the complex is somewhat minimal to start the week compared to corn and wheat, and this is due to the tight supply situation in old crop soybeans. It may also be due to the fact that the spring rally in soybeans was based almost entirely on the tight supply outlook and not on a weather premium as was the case in corn. Near term support in the November contract is at 979 1/2 with next support at 970 1/2 and 960. Near term resistance is at 1004 1/2 and at 1020.
TODAY’S MARKET IDEAS: A combination of increased planted area and a good start to the growing season could spark long liquidation selling ahead for new crop soybeans. Selling resistance for November soybeans moves down to 1008 and 1020 1/2 with 979 and 941 3/4 as next objectives. Consider selling futures on a minor bounce. Option traders can look to sell November soybeans, sell the November 940 put near 63 cents and buy the Nov 1000 call at 84 cents. December meal downside projections are at 299.20 and 286.00.
