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NEAR-TERM MARKET FUNDAMENTALS: Forecasts of good weather are dominating the news this morning along with weakness in crude oil and equities. Temperatures in the Midwest are expected to return to normal this week and then move to above normal through the middle of September. Experts indicate that these would be ideal conditions for the soybean crop. Most of the soybean crop is past the point of needing more moisture. It now simply needs enough heat to finish developing and to take it past the danger point from an early frost. One analyst pointed out that the theoretical amount of damage that could be done by a moderate freeze will start to decline substantially by the middle of September if temperatures stay at normal to above normal levels until then. Heavy rains fell in India’s soybean belt over the past few days. This gave the crop a major boost according to local sources, but more rain is needed over the next three weeks. The CFTC released its latest Commitments of Traders Report on Friday and it left the report’s format unchanged for now. The latest report was for the week ending August 25th and it showed mixed activity by funds. In soybeans, index funds were net buyers of 1,154 contracts. However, trend-following funds were net sellers of 3,705 contracts to decrease their net long position to 41,465. The trend-followers have moved to the net short side in corn in recent weeks and they have a record large net short position in wheat. In soybeans, they have been gradually moving to reduce their long position since early this summer. In oil, index funds were buyers of a scant 252 contracts. Trend-followers were net buyers of a robust 6,436 which reduced their net short position to 5,316. In meal, large non-commercial traders were net buyers of 1,272 contracts to increase their net long position to 38,375. Today was First Notice day for September futures contracts. Deliveries were Zero in soybeans and meal with oil deliveries starting at 7,640 contracts.
WEATHER: The short term forecast calls for a warm up to near normal temperature levels by the end of this week with a move to above normal through as late as mid September. Drought conditions have expanded in NE China according to government sources. Monsoon rains improved in India in recent days, especially in the soybean belt in central India where rains have been heavy in recent days.
TODAY’S GUIDANCE: The weather forecast is particularly important in that there is still the potential for a big boost in yield from the USDA’s August Crop Report, which would add substantially to the record soybean crop already being predicted by the USDA. Rains in India’s soybean belt in recent days are also adding to the potential world supply. Traders will be looking to see if China responds to a lower market with another round of big purchases to start the week. If they do, we may simply test support levels. However, if China is not a substantial buyer on the break, we could easily move to the July lows or lower in fairly short order. First support is in a fairly broad area from 970 to 982 in the November soybean contract, with the next support near 958 to 959. Resistance has dropped to near 999 and then 1025 to 1030.
TODAY’S MARKET IDEAS: A shift to warmer weather through the middle of September beginning today has helped shift the short-term trend from up to down and until there are more cold weather threats on the horizon, sellers could be more active. The 100-day moving average is at 981 1/2 today and a close under this level could attract more selling. Selling resistance is at 998 1/4 with 940 1/4 and 910 1/2 as next support. December meal selling resistance is at 307.20 with 290.20 as next support.
