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NEAR-TERM MARKET FUNDAMENTALS: China stock markets took a steep drop today, correcting nearly 5% after the recent run higher. Weakness in energy markets and a setback in Malaysian palm prices overnight added to the negative tone. China’s second attempt to sell close to 500,000 tonnes of soybeans from their reserve ended without any bids, so the government is now in a position of needing to lower the price or offer some type of subsidy to their crushers. Talk that China may have bought nearly 120,000 tonnes of US soybeans yesterday helped to provide support. However, traders see the possibility of a record crop in the US, sharply higher production from Brazil this season and increased plantings from Argentina due to wheat difficulties as reasons to expect hefty world oilseed supply ahead. Heavy rains across Missouri, Arkansas, Louisiana, Kentucky, Tennessee and even southern Illinois and Indiana this week could help boost yield prospects in fringe areas of the Midwest. The Midwest looks to remain cool and moist, with possibly a few dry spots over the next 10 days. November soybeans managed to close 20 1/2 cents higher on the session yesterday despite weakness in corn, crude oil, gold and a move from lower to moderately higher on the day for the US dollar. Rumors that China may have been buying 1-2 cargoes of US soybeans for November delivery and talk that India is still shopping for soybean oil on the world market and that much of the business may end up in the US helped support. Concerns that the CFTC hearings in Washington could spark fund selling kept the trade choppy early, but a surge higher in meal prices pulled soybeans higher. Rumors that India may not export meal due to monsoon rain concerns helped boost that commodity. August soybeans gained sharply on November as tightness concerns persisted and there was talk of tightness in deliverable supply.
CASH NEWS AND TENDERS: Basis at the Gulf held steady yesterday after recent weakness.
WEATHER: The lack of heat in the forecast and a continued flow of precipitation look nearly ideal for the developing crop. There are still no threatening heat forecasts, but after another 10 days of cool and moist weather in the Midwest, heat may be ideal as long as there is no stress. Big rains across the south this week could boost yield prospects.
TODAY’S GUIDANCE: The reversal in the US dollar, concerns over regulatory change which might limit speculators, excellent weather and a sharp break in the China stock market are all seen as negative forces today. Without weather problems into the middle of August, the odds of a record crop keep increasing. Heavy rains across the southern Corn Belt and delta region should help boost production prospects and a lack of threatening weather in the Midwest may keep buyers on the sidelines short-term.
TODAY’S MARKET IDEAS: Selling resistance for November soybeans comes in near 937 3/4 with 858 3/4 as next downside objective.
