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NEAR-TERM MARKET FUNDAMENTALS: Strong demand from crushers and a weak US dollar were seen as the primary reasons that fund traders turned more aggressive buyers yesterday. The market continues to see a clash of short-term supportive demand fundamentals with the longer-term outlook (beginning February or March) for a surge higher in world production and increasing world soybean supply. Good weather in South America is seen as a negative force but demand continues to come in stronger than expected for US soybeans. The NOPA pegged the US November crush at record 160.3 million bushels versus expectations of near 156 million. This was up from 155.3 million bushels in October and up sharply from last year’s recession-reduced total of just 139.4 million bushels. Soy oil stocks as of the end of the month stood at 2.411 billion pounds, up from 2.286 billion last month. Ideas that there may be continued support from index fund buyers into early next year was seen as a supportive force. Funds were active buyers on the session for soybeans and meal and cash markets were steady with strong export and crush demand able to absorb the flow of farmer selling. Oil saw some selling pressure from China announcement that it would release rapeseed and soy oil into its domestic market in order to maintain supplies and keep prices stabilized. There was also willingness to release soybeans from reserves to help ease prices. Moisture levels have improved in Argentina recently with up to 1 inch of additional rain expected later in the week and into the start of the weekend in major growing areas seen as a factor to see improving conditions. Southern Brazil areas look to see periods of dryness into Friday which should allow for some increased harvest activity and allow wet planted areas to dry out which is seen as beneficial. An EPA spokeswoman indicated yesterday that the agency will issue final rules on revisions to the renewable fuel standards in early January.
TODAY’S GUIDANCE: We continue to believe that there is enough supply on the horizon to be able to turn the short-term trend down in soybeans but fund buyers continue to emerge on days of new China demand or on days of a weak US dollar. Perhaps the clear and decisive turn up in the dollar overnight will be seen as a negative force. March soybean resistance comes in at 1062 3/4 and a close above this level would suggest a continuation of the uptrend with 1105 as next upside target. However, a move back under 1056 and especially 1049 1/2 might be seen as bearish signals. For now, keep 1019 3/4 and 1004 3/4 as next downside targets.
