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NEAR-TERM MARKET FUNDAMENTALS: Evening up ahead of this morning’s supply/demand report remains the main feature in the complex this morning according to traders. This factor is made even more important given that next Tuesday is the last trading day for the July futures contracts. The old crop/new crop soybean spreads have stabilized after seeing sharp losses on the old crop side earlier in the week. The oil/meal spread is also stabilizing as we near expiration in the July contracts, although this is happening with wide price swings. Yesterday’s exports for meal were disappointing amid concerns over China’s threats to cut off imports of US chicken as well as concerns over the lack of a bounce in the US economy. China’s official soybean imports for June stand at a record 4.71 million tonnes. Traders say that this is in line with expectations, and it follows more recent ideas that the total for July will remain near the June level instead of tapering off. This may be due to concerns that this year’s soybean crop in China will not be as large as originally hoped due to floods and cool temperatures in the NE. Traders report that US soybeans are currently price-competitive with Brazilian soybeans. This is unusual at this time of year since the US is normally being pushed aside in the world market by Brazil and Argentina in the weeks after Brazil has wrapped up the last of its soybean harvest. This week’s sales were considered strong for soybeans, weak in meal and weak for old crop oil. Net sales for soybeans were 287,000 tonnes for the current marketing year and 941,600 for next year for a total of 1,228,600. As of July 2, cumulative soybean sales stand at 100.9% of the USDA forecast for 2008/2009 versus a 5 year average of 99.0%. Net meal sales were 18,400 tonnes for the current marketing year and 12,500 for next year for a total of 30,900. Sales need to average 103,000 tonnes each week to reach the USDA forecast. Net oil sales were minus 60,200 tonnes for the current marketing year, but plus 98,000 for the next marketing year for a net total of 37,800. Cumulative oil sales stand at a very weak 76.9% of the USDA forecast for old crop 2008/2009 versus a 5 year average of 93.5%. Sales need to average 17,000 tonnes each week to reach the USDA’s old crop forecast. If anything, weather may be improving with a forecast of improved rains for dry areas of the NW soybean belt in Minnesota and Wisconsin. Hot temperatures look to stay in the Delta and SW Midwest. The Delta needs a break from hot weather plus some rain soon. Deliveries against the July contracts were zero again for soybeans and meal and 1,750 contracts in oil. The oil total to-date stands at 28,605 contracts.
WEATHER: Forecasts continue to call for 90 degree temperatures in the Delta, the southern Plains and the SW and south central Midwest. Severe heat is situated in the extreme southern Plains. Rain is expected in Nebraska and parts of Kansas today as well as Iowa, southern Wisconsin and eastern Illinois. Moderate temperatures and scattered rains are expected in most corn and soybean growing areas through much of next week with the exception of the Delta which is expected to remain hot. The 6-10 day calls for normal to below normal temperatures for most of the Midwest and northern Plains. The southern Plains and the Delta are expected to remain above normal. The 6-10 day calls for precipitation to be normal to above normal in the Midwest and in the central and northern Plains. Areas to the south are looking for below normal rainfall.
TODAY’S GUIDANCE: The USDA will re-adjust its accounting this morning with its July supply/demand report. We could see some fresh news on the export side with old crop sales continuing to run ahead of the USDA’s projection for the crop year, and China not backing away from added purchases despite constant rumors to the contrary. However, the market will continue to monitor crop weather and it will continue to fret over the apparent lack of an economic recovery and its fears over forced liquidation by funds and other large specs. It looks like we could see short covering over the very short term, and then and another push to the downside. First support in the November contract is at 907 1/2 to 908 1/2 and then at 880 to 884. Resistance starts at 924 with good resistance also at 939 to 943.
