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NEAR-TERM MARKET FUNDAMENTALS: The primary market factors this morning include a recovery in equity markets and reports that Friday’s rains in Argentina were less widespread than previously hoped. Traders said that the soybean complex is also seeing follow-through strength from last week’s strong export sales numbers and continued light to moderate selling by farmers. The Commitments of Traders Report for the week ending 2/17 showed a big increase in the net short position by trend following funds in both soybeans and soy oil. In soybeans, index funds were net sellers of just 252 contracts while trend-followers were net sellers of a whopping 19,316 contracts to decrease their net long position to just 8,202. Small traders were also net sellers so this suggests a big shift to the short side by specs. In oil, index funds were net sellers of 1,175 contracts while trend-followers were net sellers of 6,859 to increase their net short position to 14,240. Small traders were also big net sellers of 4,244 in oil. In meal, large non-commercial traders were net sellers of 7,308 to decrease their net long position to just over 14,000. Officials in China repeated on Friday that recent precipitation has improved conditions in formerly drought-stricken areas, including for the rapeseed crop. In India officials report that prospects remain favorable for rapeseed which remains pegged at 7.0 million versus 5.8 million tons in 2007-08. The latest Export Sales Report was out on Friday. Totals were considered strong for soybeans and very strong for oil, with meal sales about in line with trade expectations. Net sales for soybeans came in at 1,094,200 tonnes for the current marketing year and 86,000 for next year for a total of 1,180,200. Sales of just 164,000 tonnes are needed each week to reach the USDA forecast. Net meal sales were 142,600 tonnes for this year and 100 for next year for a total of 142,700. Sales of 106,000 tonnes are needed each week to reach the USDA forecast. Net oil sales were 46,100 tonnes, all for the current marketing year. Cumulative soybean oil sales have jumped to 52.8% of the USDA forecast for 2008/2009 versus a 5 year average of 70.0%. Sales of 10,000 tonnes are needed each week to reach the USDA forecast.

CASH NEWS AND TENDERS: Iran may purchase 20,000 to 30,000 tonnes of soy oil and the same quantity of sun oil. Bangladesh is tendering for 5,000 tonnes of soy oil.

WEATHER: On Friday, showers and thunderstorms in Argentina were concentrated mainly to the north and somewhat to the east with coverage running at about 40% versus earlier expectations of up to 70%. Temperatures were much cooler over the weekend with a warm-up expected to near normal this week. Dry weather is expected in Argentina into mid week. Weather was somewhat drier in northern growing areas of Brazil over the weekend where the soybean harvest is currently underway. Scattered showers and thunderstorms are expected in the central and southern soybean belt including the key corn-growing sate of Parana. This should be beneficial.

TODAY’S GUIDANCE: A rally in equities and less than expected rain coverage in Argentina over the past three days has generated short covering strength in the complex. This has included a sharp overnight gain by meal over oil. In general, farmers have continued to avoid heavy selling despite one small burst last week. If this continues into the start of this week and equities can maintain some strength, we may see further short covering.

TODAY’S MARKET IDEAS: The economic bears are taking a break this morning and that is bringing back the need for short covering in the complex. The fact the latest round of rains in Argentina missed substantial portions of the soybean crop means that we are running out of time to see a bump upward in production on improved weather. Meal could gain back up to $1,500 over oil this week which will give traders and excellent opportunity to buy oil and sell meal.

This content originated from – The Hightower Report.
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