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NEAR-TERM MARKET FUNDAMENTALS: The market saw a decent recovery to the upside yesterday despite weakness in other grains and mixed outside market signals. Traders are torn between the bullish news of strong upfront export sales for soybeans and products which might hold prices higher and the outlook for increasing US and world ending stocks for the coming season. While traders have talked that open interest might ease off into the end of the year, the open interest trend remains up. Since the November 10th USDA reports which showed expanding stocks for the 2009/10 season, open interest is up 62,313 contracts to 482,169. Argentina looks mostly dry with a few scattered rains early next week but conditions have improved due to recent rains. Brazil conditions look near ideal and even the southern wet areas look to dry out over the near-term. Dryness in Argentina could start to get problematic if it extends for more than a week. Statistics Canada estimated the 2009/10 canola crop 15% higher than their previous estimate at 11.8 million tonnes. This was about 1.0 million tonnes above trade expectations which was seen as a negative development. Weekly export sales for soybeans came in at 722,600 tonnes, below 1 million for the first time in one month as there are indications that China may slow purchases over the near-term. China has already booked more than 17 million tonnes of US soybeans for the season (which began on September 1st) as compared with the USDA estimate of total imports for the season to reach 40.5 million tonnes. The China National Grain and Oils Information Center has indicated that China imports in December and January alone will be near 9.6 million tonnes and that China could see reduced demand from crushers to book more imports anytime soon as buyers will be concentrating on booking South America soybeans for February and deferred shipment from now on. Cumulative soybean sales stand at 78.3% of the USDA forecast for 2009/2010 versus a 5 year average of 52.7%. Sales need to average just 193,000 tonnes each week to reach the USDA forecast. The Census Bureau released its latest US soy oil stocks report yesterday. Stocks as of the end of October stand at 2.723 billion pounds, down from 2.742 billion at the end of September. Oil used for methyl ester (bio-fuel) in October totaled 212.3 million pounds versus 205.8 million the month before.
TODAY’S GUIDANCE: The longer-term supply situation is still negative and the market is still under the negative technical influence of the December 1st reversal. If China demand slows, the market could see a significant setback. Look for good selling resistance for March soybeans at 1061 with 1035 as light support and then 1019 3/4 and 1004 3/4 as near-term downside targets. March meal selling resistance is near 309.30 with 294.90 as downside target.
