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NEAR-TERM MARKET FUNDAMENTALS: Without help from outside markets, soybeans came under pressure overnight as the market resorted back to the outlook for good harvest weather this week and bearish news from the USDA this week which attracted new selling. Funds have been active buyers of soybeans and commodity markets in general recently with a declining US dollar and a very easy-money policy by the Fed helping to attract new investors. Solid gains in the US dollar appear to have turned the psychology more negative for those commodity markets which do not seem to have the fundamentals to move higher. For soybeans, the outlook for US ending stocks to increase by 95% to 270 million bushels and world soybean ending stocks to increase by 35% to 57.39 million tonnes has soured the price outlook. In addition, traders are not ruling out an even higher yield and higher production for the US as harvest weather has turned from near disastrous to near ideal. The USDA also reported record high production forecasts for Brazil and Argentina for the coming season for the crops which are just being put in the ground. There are still concerns with the dry pattern for key growing areas of Argentina but at this early stage, traders seem to be taking a wait-and-see attitude regarding the slow planting pace with planting progress near 33.8% complete as compared with 40.8% as normal. Argentina is expected to see some rain early next week although this could miss the very dry southern soybean belt there. Dry weather is expected in all areas until then which will increase the need for moisture, especially in the western and southern growing areas. Traders believe China buyers will slow down on purchases in the coming weeks, according to a survey of buyers from the China National Grain and Oils Information Center. China has already booked near 15 million tonnes of US soybeans and there is talk that they are booked through January. October soybean imports from China reached just 2.52 million tonnes which was down for the 4th month in a row and compares with peak of 4.7 million tonnes in June. Funds were noted as active buyers yesterday but there is a growing concern that funds could turn sellers if we go through a period of steady or higher trade in the US dollar. The latest weather forecasts call for increased rain in the Midwest from late in the weekend into early next week. The weather models overnight seem to be even wetter for early next week. Dry weather into the weekend should keep harvest active. Gulf basis was firm yesterday. The overnight deliveries against the November soybean futures contract were 222 contracts. Friday will be the last trading day for November soybean futures.
TODAY’S GUIDANCE: The market appears poised to push sharply lower “if” the fund buying spree slows and the focus shifts back to the soybean market fundamentals. A series of lower highs off of the October 23rd highs leaves the technical set-up a bit negative as well and a short period of a higher or even steady US dollar could spark aggressive selling from funds.
TODAY’S MARKET IDEAS: March soybean selling resistance comes in at 979 with 967 1/2 and 941 1/4 as next objectives. Use 905 1/2 as next downside target. January soybeans look set to test key support at 940 1/2 with 971 1/2 as close-in resistance. March Meal selling resistance is at 285.40 with 267.40 as next swing target.
