NEAR-TERM MARKET FUNDAMENTALS: The grain markets were shocked by a lower than expected soybean acreage number yesterday as well as much larger than expected acreage numbers in corn, wheat and other crops. The USDA also found some extra corn and soybeans on its quarterly stocks reports to add to the generally bearish tone. However, traders noted that the soybean acreage number was actually bullish and the USDA added to the bullish news in soybeans with an announcement after the open that China was a buyer of 113,000 tonnes of old crop soybeans. This combination of bullish and bearish news within the grain markets sent the old crop/new crop soybean and meal spreads reeling throughout the day, with much of the action said to center around liquidation by spreads as we enter the July delivery period. However, the final result was another gain by old crop contracts. Prices then rallied overnight in both old and new crop contracts in soybeans, meal and oil. The USDA’s soybean acreage number was only 77.483 million, about 500,000 acres below trade expectations. However, this was still up from 76.024 million acres on the USDA’s March 31st report, and it is the largest soybean acreage number on record. The quarterly stocks number in soybeans was 597 million bushels, about 12 million above trade expectations. Weather is moving back to center stage. Precipitation remains light with forecasts for more of the same into next week, and some traders are concerned about growing dryness in the NW soybean belt. Temperatures are expected to remain moderate over the next week, but a mass of hot air with above normal temperatures is expected to move into the central and western soybean belt and the Delta during the second week of July. Deliveries against the July contracts this morning were again zero for both soybeans and meal and 5,721 contracts in oil with the 2-day delivery total in oil now standing at 10,667.
WEATHER: Dry weather is expected to continue today in most of the Midwest with the exception of the NE corner. A band of rain is also expected from western North Dakota down through eastern Kansas and into northern Arkansas. The Midwest should ten remain mostly dry through early next week with the exception of some rain in the SW and south central Midwest on Friday, Saturday and Sunday. Temperatures are expected to be moderate in much of the Midwest through next week and hot in the southern and central Plains. This may shift to a generally hot pattern starting about ten days out with a hot air mass covering nearly all of the Midwest and Plains from 10 to 14 days out.
TODAY’S GUIDANCE: After the smoke cleared from yesterday’s big USDA reports, old crop soybeans and meal told us that the spring rally is still in effect. This should produce new highs in old crop meal and oil, but the fact that the recent leadership has come mainly from old crop/new crop spreads suggests that the issue of new highs in new crop meal and soybean contracts is less likely. In the meantime, China was a buyer in old crop soybeans yesterday, which reinforces the idea of old crop tightness. Support for November soybeans is at 970 3/4 with first resistance near 1004 1/2 and just under 1019 1/2.
TODAY’S MARKET IDEAS: The threat of coming in after a long weekend to see a more threatening weather outlook for the third week of July may be enough to support more buying in the short run. The planted acreage break caused a short-term oversold condition as well.