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NEAR-TERM MARKET FUNDAMENTALS: Weather is front and center in the soybean complex this morning according to traders. Prices were marginally higher in the complex overnight with some traders crediting this to a forecast of colder weather during the later stages of the 6-10 day period. This is not expected to be a hard freeze at this point, but even a scattered frost is considered problematic by some analysts due to the extreme lateness of this year’s soybean crop. In the meantime, most forecasts call for normal to above normal conditions through the next 6-7 days, and this is considered very favorable to crop development. The latest Crop Progress report showed 68% of the soybean crop rated good/excellent which was unchanged from last week last week and compares with 57% last year. The 10 year average for this time of year is 53%. Seventeen percent of the soybean crop is dropping leaves, up from 7% last week and a 5-year average of 36%. The USDA announced two new sales of soybeans yesterday. One was to China for 113,000 tonnes and the other was for 110,000 tonnes to South Korea. If there are no major cancellations on the next Export Sales Report this Thursday, total soybean sales to-date should push well past 50% of the USDA’s projection for 2009/10. This would come only halfway through the first month of the new crop year, far ahead of the sales pace ever seen at this point going back to at least 1994/05. The National Oilseed Processors Association (NOPA) released its monthly crush numbers for August yesterday before the open. Both the crush number and oil stocks were considered supportive. NOPA’s August crush was 112.6 million bushels, down from 120.9 million in July. This was also down from August 2008 which was at 121.7 million bushels. Oil stocks were pegged at 2.52 billion pounds, about 100 million pounds below trade expectations. This week’s export inspections were in line with trade expectations at 10.2 million bushels. Inspections need to average 24.8 million bushels each week to reach the USDA’s projection for the marketing year.
TODAY’S GUIDANCE: The soybean market has established a pattern of moving lower in stages and this may continue. The reason for the downtrend is mainly the good weather in the US and favorable crop prospects in South America. The reason for the pauses is good export demand with 2009/10 export sales in soybeans already at near 50% of the total currently being projected by the USDA for the entire marketing year. Good weather should continue to trump demand as long as it we can avoid an early freeze. First support in the November contract remains at 884 to 885. Next support is near 861 to 864 1/2. First resistance remains at 910 1/2 and then at 940 1/2.
TODAY’S MARKET IDEAS: Given the oversold condition and threat of frost late next week, look for short-term bounce. Modest short covering is possible in the soybean complex as the market tries to sort out whether or not there will be a frost after next week. Barring a major cold snap, continue to look for a break below the July lows.
