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NEAR-TERM MARKET FUNDAMENTALS: The financial markets appear to be right back at center stage this morning with the S&P extending the losses on Friday that took the index below its November lows. This weakness is also evident in crude oil which extended its overnight losses into the early hours of this morning. Export demand is showing signs of cooling after a brief surge in February, and traders say that this adds to the negativity. Sources in Brazil report that movement of soybeans into the marketing chain is brisk despite some previous delays in the early harvest. Weather there has improved recently with drier conditions in the north where harvest is underway and wetter weather in the extreme south where crops are still developing. This is expected to continue. Rain is still expected in Argentina into tomorrow. Scattered rains fell overnight with more scattered showers and thunderstorms expected tomorrow. However coverage looks somewhat less extensive that indicated on last week’s forecasts. The Commitments of Traders Report for the week ending February 24th showed that trend-following funds remain net sellers and that this has now tipped their net position over to the short side in soybeans. This selling trend has been underway for some time in the grains in general with the trend-followers already having large net short positions in both corn and wheat. Although this category of funds is not broken out specifically in meal, the trend also appears to be toward the sell side there. In soybeans, index funds were sellers of 1,857 contracts while the trend followers were net sellers of 9,581 to take them to a net short position of 1,379. In soy oil, index funds were very small net sellers while trend followers were net sellers of 2,416 to take their net short position to 16,656 contracts. In meal, large non-commercial traders were also big net sellers of 5,702 contracts to reduce their net long position to just 8,484. Deliveries against the March contracts were zero in soybeans, 2 contracts in meal and 1,682 in oil. The USDA Outlook forum showed some preliminary supply/demand estimates for the 2009/2010 season led by a planted acreage forecast of just 77 million acres. Ending stocks are pegged at 380 million bushels vs. 210 million this year and traders believe that the USDA may be under-estimating the total planted area to all grains and that plantings could jump by 2 or more million. If up to 79 million planted, ending stocks would jump to near 465 million bushels.
CASH NEWS AND TENDERS: Egypt is in the market for 20,000 to 25,000 tonnes of soy oil and 6,000 to 9,000 tonnes sunflower oil. Taiwan is in the market for 40,000 to 60,000 tonnes of soybeans. 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: The recent weather trend in Brazil is expected to continue with northern harvest areas remaining dry and Rio Grande do Sul continuing to get needed moisture. In Argentina, rainfall last night and into today has been somewhat less general than expected, although it has brought some overall improvement to the soybean crop. Dry conditions are expected to resume by Thursday.
TODAY’S GUIDANCE: One of the more potentially bearish factors of the USDA outlook forum news is the prediction that total planted area to all grains in 2009 will be down more than 5 million acres from last year. If not, many of these “extra” acres may be planted to soybeans. The switch to a net short position in soybeans by trend following funds indicates a general trend in that direction in the grains. Trend-followers are now net short a small amount which leaves a lot of room for additional selling since the record high short position is over 68,000 contracts in soybeans. The new low for 2009 in May soybeans on Friday suggests that prices may gravitate toward the early December low at 786 1/2 and to 796 1/2 in November. The next support is near 850 in May soybeans with further support near 828. However, the ultimate objective may be as low as 725. Resistance is near 880 to 883 1/2.
