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NEAR-TERM MARKET FUNDAMENTALS: Weather is still the main focus of traders’ attention, and forecasts yesterday saw marginal shifts in the amounts of rain expected in Argentina at the start of next week. The latest forecasts feature drier and hotter weather in Argentina over the next 5 to 7 days which is expected to add to crop stress. The soybean crop in Argentina, much of neighboring Paraguay and parts of extreme southern Brazil will be in the pod-filling stage during much of the next month leaving plenty of potential for the crop to either improve or see further significant weather damage. Hence, the continued focus on weather. The soybean market opened lower yesterday and rallied into mid session. This was followed by a late-session sell off that left the soy complex near the lows of the day on the close. Funds were sellers over the course of the day in an otherwise featureless market according to traders. The USDA will release its latest Export Sales Report this morning and it is expected to show a continued pullback in soybean buying by China. Traders indicate that they will be watching meal and oil sales more carefully than they have in recent months. A recent firming in demand for both products has come from a broad customer base and some traders and analysts are waiting to see if demand for products will stay on a firm note due to expectations of sharply reduced soybean production in Argentina. That country is the world’s largest exporter of both soy meal and soy oil. Domestic demand was hit for both oil and meal recently and the USDA revised crush and bio-diesel usage down this week. Eggs set to incubators this week was 202 million eggs, down 7% from last year. The USDA this week lowered domestic meal demand to down 7.3% from last year.
CASH NEWS AND TENDERS: A private South Korean feed maker group bought 55,000 tonnes of soy meal today. A Taiwanese food group is looking to buy 56,000 tonnes of US soybeans.
WEATHER: Forecasts for Argentina mostly call for a resumption of drier and hotter weather. This is expected to last for the next 5-7 days. Brazil saw some rain in northern areas of the state of Rio Grande do Sul over the past 24 hours but little rain is expected there today and tomorrow.
TODAY’S GUIDANCE: Weather has been the driving force in the soybean complex over the past week from Argentina where forecasts have shifted back and forth and conditions have marginally improved. But the market may also be following the economic situation and the reemergence of economic pessimism. In so doing, soybeans have tracked crude oil as closely as any other outside factor this week. Swings in both directions in soybeans over the past few weeks have eliminated many of the smaller spec shorts and longs. This suggests that fresh direction will likely come from funds and farmers. Funds were sellers yesterday and the day before and the drop in the Gulf basis late last week may have been the first sign that farmers are willing to step up their sales pace below the $10 level. This should keep the short term direction lower barring a clear and sustained forecast of hot and dry weather in Argentina for the next two weeks. Look for more selling over the near-term.
