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NEAR-TERM MARKET FUNDAMENTALS: Weaker outside markets set a negative tone overnight according to traders, particularly the weakness in equities. Traders indicate that mostly favorable planting weather over the weekend and forecasts for more of the same into tomorrow may have also added to the negative tone overnight, although this weather was in the forecast late last week. Rains may then bring scattered delays from Wednesday into next weekend, but forecasters are also calling for several windows of dry weather over that stretch. Traders indicate that the complex may also be seeing some evening up ahead of tomorrow’s USDA reports, along with continued concerns that Chinese demand for soybeans may be softening over the short term or getting deferred.
Traders look for a 35-40 million bushel decline in ending stocks for the 08/09 season from last months 165 million bushel forecast due to the loss of Argentina supply and continued strong US exports over the past month. For new crop, traders see ending stocks near 230 million bushels with estimates in a wide range from less than 150 million to near 350 million.
There was also talk on Friday that “if” the corn plantings pace in the eastern Corn Belt does not pick up that soybean plantings could increase significantly from producer expectations in March and this helped limit the upside as well. The Malaysian Palm Oil Board said today that stocks of crude palm oil dropped to a 22-month low in April. They fell 5.4% during the period to 1.29 million tonnes. However, this marked a slower rate of decline than was seen in March when stocks fell by nearly 13%. Palm oil exports for May 1-10 rose 10.7% versus the same period in April in data released today. The combination of strong exports and declining stocks has left that nation’s stocks at less than the monthly rate of exports. This helped to take palm oil futures substantially higher to start the day in Malaysia, but prices slipped to nearly 1% lower into the close on weakness in crude oil and the soybean complex according to traders there. Indonesia is considering reinstating its tax on palm oil exports after a 6-month stretch with no tax due to tightening stocks in Malaysia and increased demand for vegetable oils in Asia.
The Commitments of Traders Report for the week ending May 5th showed strong net buying by funds. In soybeans, index funds were net buyers of 10,967 contracts to increase their net long position up to 126,000 contracts which is an increase of about 40% since late 2008. Trend-following funds were net buyers of a very large 19,182 contracts taking their net long position to over 76,000 contracts, the highest levels since the first half of 2008. In soy oil, index funds were net buyers of just 212 while trend-following funds were net buyers of a large 6,799. The trend-followers were net short over 26,000 contracts in oil in mid-March, and they are now net long by over 6,000 contracts. In meal, large non-commercial traders were also large net buyers of 10,700 contracts to increase their net long position to over 44,000 contracts.
CASH NEWS AND TENDERS: Basis levels were near steady for soybeans last week at the Gulf. The basis was also mostly steady in Central Illinois. An Israeli consortium is tendering for 7,000 of US soy meal.
WEATHER: The weekend saw scattered showers and thunderstorms across the northern tier of the Midwest with amounts ranging up to just 1/2 inch. The southern Midwest also saw scattered showers and thunderstorms, but amounts were heavier, ranging from 1/4 to 1 1/4 inches. Today and tomorrow are expected to be dry in most areas with the exceptions of some light showers in the east today and in the west and NW tonight and tomorrow. Wednesday may see scattered showers and thunderstorms across the region with drier conditions returning to the central and northern corn and soybean belts on Thursday and Friday. Temperatures are expected to be on the cool side to start the week, shifting to normal-to-above-normal on Wednesday through Friday.
TODAY’S GUIDANCE: The outlook for more acreage and increasing supply for the new crop season and the extreme overbought condition of the market could spark a short-term downside correction in soybeans. November has a double top at 992 and the market may need help from the weather to avoid a jump in planted acreage. If China demand slows, old crop could also correct.
TODAY’S MARKET IDEAS: Selling resistance for November soybeans is still at 981 with close-in resistance today at 973. Keep 951 and 938 as near-term downside targets. December meal still looks sluggish and a move under 1st target at 275.60 leaves key support back at the uptrend channel support at 263.60. July soybeans are still operating under the negative technical influence of the May 7th reversal with 1st good support back at 1071 1/2.
