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NEAR-TERM MARKET FUNDAMENTALS: The soybean complex saw a mixed performance on Friday with soybeans and meal giving back some early gains, but closing higher. Wet weather late last week and into Saturday matched expectations. Forecasts call for heavy rains in the western Delta today with that rain pushing east and north into the mid south and Deep South by tomorrow. A band of mostly light rains is expected from East Texas up through southern Wisconsin with areas to the east and west of this band staying mostly dry. The Commitments of Traders Report for the week ending October 20th showed net buying by funds as expected on the recent rally. In soybeans, trend-following funds were net buyers of 6,713 contracts while index funds were net buyers of just 382 contracts. Trend-followers were big buyers of 14,554 contracts in soybean oil which reduced their net short position to just 2,333 contracts. Index funds were net sellers of 1,261 in oil. In meal, large non-commercial traders were net sellers of just 785 contracts. The Malaysian government has proposed reducing the blend of palm-based diesel fuel to 2-3%. The government had been expected to raise their bio-diesel mandate to a 5% blend in 2010. The proposed reduction is thought to be due mainly to higher prices and a need for the government to save on the cost of related fuel subsidies. Malaysian palm oil exports were estimated to be up 6.8% for October 1-25 from last month according to an independent cargo surveyor. Good weather in Brazil and the move by many producers to plant early and to plant early maturing soybeans could help ease the tightness expected on the world market for early next year. Traders continue to look for a very large production from Brazil, Argentina and Paraguay for 2010. Beginning January, Brazil will raise the biofuel content of its diesel to 5% from 4% previous.
TODAY’S GUIDANCE: Traders are worried this morning that price action in corn and wheat on Friday constituted a reversal of the September-October rally. If it did, this could threaten the rally in the soybean complex as well. However, price action in soybeans was much more mixed on Friday and that may throw traders’ attention back on the dollar which was lower overnight. This supported the complex overnight amid the expected harvest delays from last week’s late rains and some mostly light showers to start the week. Last week’s strong export sales figures continue to run counter to ideas that China and others have already booked much of their needs into early 2010 and that they are shifting their buying to South America for spring shipment. Taking profits on rallies in soybeans is ok, Getting short is not. First support remains at 1000 in January soybeans with next support near 982 to 985 and then near 975. We would still put light and temporary resistance at 1028 1/2 even though the January contract pushed just past that level on Friday. More substantial resistance lies in a zone from 1040 to 1050.
TODAY’S MARKET IDEAS: The soybean market had every reason to break sharply on Friday, but it did not. However, today may be the key test for bulls.
