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January soybeans were 7 cents lower overnight. Palm oil futures in Malaysia were up more than 2.1%. The dollar was mixed and crude oil was lower.
NEAR-TERM MARKET FUNDAMENTALS: A sharp rally in the soybean complex yesterday was credited to a sharp break in the dollar and a sharp rally in crude. This lifted a broad range of commodity markets with traders indicating that some optimism over proposed economic bailouts and stimulus packages also provided support. Funds were buyers of at least 3000 contracts into midday. Prices were modestly lower overnight with soy oil leading the way to the downside despite gains in Malaysian palm oil overnight. China’s General Administration of Customs agency said yesterday that its October soybean imports were down 25% from last year to 2.13 million tons. However, overall soybean imports rose 26% over last year during the Jan-October 2008 period. This week’s export inspections for soybeans were strong again at 36.276 million bushels. Inspections stand at 30.3% of the USDA’s projection for 2008/09 compared to a 5-year average of 30.8%. Inspections need to average just 17.5 million bushels each week to reach the USDA projection. Conditions in Argentine growing areas remain dry overall, but some relief has already occurred since Sunday in central growing areas and more widespread scattered relief is expected through Friday. However, the soybean crop is expected to remain under stress after these rains due to the severity of long term dry conditions.
CASH NEWS AND TENDERS: Iran is in the market for up to 25,000 tonnes of soy oil and up to 20,000 tonnes of sun oil. India is in the market to buy 26,500 tonnes of edible oils by mid-November.
WEATHER: Lingering snow is expected in the eastern Midwest today followed by mostly dry conditions in the Plains and Midwest into Thanksgiving. More rain is expected in major growing areas of Argentina through Friday, but this may only be scattered.
TODAY’S GUIDANCE: The soybean market is positioned very differently from corn. It did not make a substantial new low last Friday which means that the powerful recovery rally yesterday was able to take the January soybean contract back up near the middle of the October-November price range. This strongly suggests that the lows are in place barring a rally into new highs by the dollar or, perhaps, sharp new losses in the stock market. Export demand remains strong and farmers are not likely to start selling at an accelerated pace any time soon. Also, the old and new administrations in Washington are signaling that bailouts and stimulus packages will be the order of the day in coming weeks and months. This does not support the idea of a continuation of the downtrend, rather, it supports the idea that commodity inflation is lurking somewhere down the road.
