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NEAR-TERM MARKET FUNDAMENTALS: Yesterday’s sharp advance did not dampen buying enthusiasm overnight. Traders said that the latest support came from a late break in the dollar index overnight after the index had initially traded modestly higher. Wet weather is keeping harvest pace on the sluggish side with more unwelcome rain expected in the Delta today and into the western Midwest by tomorrow. Traders indicate that China has shifted its buying interest to South America in recent days with a concentration on post-harvest delivery slots in April and May. They are thought to still need US cargoes for late 2009 and early 2010 delivery. However, China’s announcement to start the week that they remain committed to a policy of stockpiling domestic soybeans raises questions about buying patterns according to one analyst. He indicated that a combination of factors could drive China back to the US over the next few months. These include a weak dollar which makes US soybeans less expensive and generally profitable crush margins for processors in China. In addition, China tried to sell its own soybeans this summer at prices that were considerably higher than current levels in Chicago futures markets. This could indicate that the government price support level will remain oriented to the high side which would again make the price of imports relatively cheap. Deliveries against the October contracts were zero again in meal this morning and 263 contracts in oil. Total oil deliveries so far this month stand at 9,085.
TODAY’S GUIDANCE: The plunge to a new low in the dollar index late last week helped to reset traders’ minds in the direction of inflation. However, the lack of follow through in the days since then leaves soybean traders looking for a reason to buy this morning. They may not find one until either: 1) the dollar resumes its downtrend, or 2) China starts buying again. In recent weeks, China has put out the word that its buying will drop sharply in October. However, they announced at the start of the current week that they remain committed to stockpiling domestic supplies of soybeans, rapeseed and corn. There is no word on the prices that they will pay for soybeans or the amounts that might ultimately be bought, but this suggests that the pace of export sales in soybeans may continue to be strong in coming weeks and months. Soybeans may hit the pause button today, but more buyers will be waiting in the wings if we move sharply lower. First support today is at 979 1/2 to 984 in the November soybean contract with the next support near 960. First resistance is now near 1015 to 1016.
TODAY’S MARKET IDEAS: Traders can key off today’s price action. If we hold above 985 in the November contract and close higher, assume a further advance tomorrow. However a break below 980, especially late in the day, would point to a move down to as low as 945 to 950. Look for January meal to continue to gain on July meal. Support for January meal comes in at 301.10 and 297.40 with 309.70 as next resistance.
