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NEAR-TERM MARKET FUNDAMENTALS: Yesterday brought another round of substantial gains in the soybean complex with support coming from fund buying as it did on Monday. Traders also cited a sharply higher gold market and forecasts of moderate rains in some harvest areas in the Midwest early next week as a source of support. Heavier amounts of rain are expected in much of the Delta and parts of the mid south next week, but these rains are not expected to be as widespread or heavy as previous rains in that region. Some forecasts indicate that this next mini-wave of rain will be followed by another dry spell in virtually all harvest areas through the end of next week. This could allow soybean harvesting to get closer to completion by the end of next week. Weather remains mostly favorable in Brazil with planting progress said to be well above normal. Planting is most advanced in Mato Grosso with recent rains slowing the pace somewhat in parts of southern Brazil. Argentina is generally drier than in neighboring Brazil, but recent rains have improved planting conditions. Brazil’s trade ministry reports that October 2009 soybean exports were 722,700 tonnes, down sharply from 1.830 million tonnes in September and also down from 1.061 million tonnes in October, 2008. Brazilian meal exports were also down versus September and last year while oil exports posted a small gain versus September. Deliveries against the November soybean futures contract were 220 contracts this morning. These were the first deliveries that have been made so far against the November contract.
TODAY’S GUIDANCE: Yesterday, the soybean complex and grain markets signaled that Monday’s late rally was not a fluke. Funds were buyers again and soybeans pushed well above Monday’s highs. This suggests that last week’s setback was merely a correction and that the intermediate term trend is higher. Bull spreads continue to gradually work higher as a result of the big window of demand for US soybeans and products prior to the harvest of South American crops next spring. This was illustrated in the big export inspection number on Monday which tells us that the time has come to ship the soybeans that China and others have been buying at an aggressive pace for the past several months. Add the surge of fund buying to the mix and this could carry the January contract to as high as 1107 by early 2010. A series of support levels fall in at 996, then 983 to 985 and then at 968 1/4. First resistance is at 1029 1/4 and then near 1049.
