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NEAR-TERM MARKET FUNDAMENTALS: A higher dollar overnight brought light pressure to soybeans and the products according to traders. Weather remains on the front burner with concerns over this week’s moderate to heavy rains in already wet areas of Illinois with more rain forecast for today in southern and eastern Illinois and Indiana. Despite recent planting progress in other areas, there is concern that continued delays in Illinois, Indiana, North Dakota and western Canada could bring further increases in planted area for soybeans and canola. However, dry weather in Western Australia could bring a reduction of 10% in canola acreage versus expectations, although this is less than the potential for increased oilseed area in North America. Meal exports by China are also in the news again today with traders continuing to report sales into SE Asia due to a recent glut of meal in the domestic Chinese market. However, one analyst pointed out that this follows a substantial decrease in meal exports by China during the 1st Quarter of 2009. He added that the recent flurry of meal exports by China does not compensate for the absence of more than 2 million tonnes of Argentine meal from the world market over the course of the coming marketing year due to this year’s drought there. The US Census Bureau will issue its monthly crush report for April this morning. Traders and analysts are looking for a crush total for the month of just over 141 million bushels. This compares to the NOPA estimate of 134.1 million that was made earlier in the month. (NOPA only surveys processors who are members of their association while the Census Bureau surveys all US crushers.) If traders are correct, the April crush would be down about 6 million bushels from April, 2008, but this is still up from the differential seen in prior months. Traders also expect meal stocks to decline from March to about 340,000 tons, and they expect oil stocks to increase. The USDA’s Export Sales Report will be delayed until tomorrow due to the Memorial Day holiday this week.
CASH NEWS AND TENDERS: A state-owned entity in Egypt is looking to buy 20,000 tonnes of soy oil and 20,000 tonnes of sunflower oil.
WEATHER: Rain is expected to hit eastern and southern Illinois and much of Indiana today, but possibly not Ohio as previously forecast and overall amounts may be less than previous forecasts. This should be followed by dry conditions across virtually the entire Midwest tomorrow and Saturday and possibly into Sunday. Illinois and the eastern and southern Midwest may then remain dry into Monday. Conditions become more mixed after that and the 6-10 calls for above normal rains in Illinois, Indiana, Missouri and much of the western corn and soybean belts.
TODAY’S GUIDANCE: The steepness of the uptrends on soybean and meal charts is making some bulls a little nervous. Either these markets are getting ready to take off on a test of last year’s highs, or they are about to correct from an overbought situation. Since the rally is strongly supported from a fundamental standpoint, we need to be prepared to stay long while keeping a close eye on the dollar and open interest. A stronger dollar this morning raises the possibility of a more substantial recovery in that market, and a look at charts of the dollar index and soybeans shows that they have had a direct inverse relationship since late April. That would seem to make the dollar the key indicator in the soybean complex today and tomorrow. Further gains in the dollar and a strong finish today would prompt some short covering in soybeans, and a possible downturn in open interest. However, if the dollar falters on its current mini rally, soybeans and meal could just continue higher. First support remains at 1175 in the July contract today with next support near 1141. It is tempting to put first resistance at 1200, just under yesterday’s highs, but we would keep it at 1207 1/2 with next resistance at 1239 1/2.
TODAY’S MARKET IDEAS: With the possibility of increased tightness ahead for old crop and increased planting prospects for soybeans in the eastern Corn Belt and from spring wheat areas, consider the July/Nov or August/Nov bull spreads. Markets are extremely overbought but corrections still look like buying opportunities for old crop beans and meal.
