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NEAR-TERM MARKET FUNDAMENTALS: Modest gains in the overnight session came as outside markets turned neutral and farmers selling in soybeans tapered off. Yesterday was a far different story with steep declines in energy and equities markets helping to generate selling by funds and commission houses in the soybean complex. Increased farmer selling was also noted and that brought weaker basis levels for soybeans at the Gulf and in the interior. The USDA released its Planting Progress Report yesterday afternoon, but it is still too early for soybeans to be included. Warmer weather is forecast after mid week and this should finally speed up some field work and planting progress in corn. This week’s export inspections for soybeans were 15.671 million bushels versus 17.771 million last week. Total inspections to date stand at 81.6% for the 2008/09 crop year compared to a 5-year average of 82.0%. The USDA announced a sale of 110,000 tonnes of US soybeans to China yesterday morning. This was for the 2008/09 crop year. They also announced a sale of 120,000 tonnes of US soybeans to an unknown destination for 2009-10 with many traders also assuming that was to China. There was also a sale of 40,000 tonnes of US soy oil to India for 2008-09. The USDA says that the 2009 oilseed crop in Russia should be down slightly to 8.5 million tonnes due to a return to more normal yields after last year’s record crop. The US agricultural attache in Brazil is pegging this year’s soybean crop at 58 million tonnes versus 57 on the last S&D Report. They project 2009/10 production at 59.7 million tonnes on expectations of improved weather and yields.
WEATHER: The main weather story in the US is the surge of cool air that is dominating virtually all of the Midwest and Plains today and pushing down as far as the northern Delta. However, this is expected to start changing by tomorrow with a massive surge of warm air moving in from the south southwest that should cover most major growing areas in the Midwest, Plains and Delta by Friday. Cooler air is then expected to push into the northern Plains starting on Friday and into the Midwest by this weekend.
TODAY’S GUIDANCE: The soybean market’s sharp retreat from the January highs over the past two sessions was accompanied by increased farmer selling and weaker basis levels. While export demand remains quite strong it is important to note that we are not yet at the end of the 2008/09 crop year yet, and there are still far more soybeans on hand right now, than the 165 million bushels that the USDA projects will be left on September 1st. Given the availability of substantial supplies and the apparent willingness of farmers to increase sales above the $10 level, we expect to remain short of the highs in soybeans for a few more sessions. In fact, crude oil and equities may be the factors that determine whether the July contract will see a further sharp retreat to near 940 to 955, or whether it will hold above the 985 to 1005 consolidation zone. In fact, those outside markets may help to shape farmer psychology which will determine whether they continue selling at the increased rate we have seen over the past two trading days. First support is at 1002 to 1005 in the July contract, with the next support at 995 1/2. First resistance is at 1023 3/4 with better resistance at 1030 and at 1050 1/2.
