Soybeans Commentary

storck

Just My Opinion – Soybeans

Soybean Commentary
July Soybeans ¾ cent higher ($9.22), Aug 1 ¼ cents higher ($9.25) and Nov 2½ cents higher ($9.28)
July Meal closes $1.3 lower ($300.6), Aug $1.3 lower ($302.2) and Dec $1.7 lower ($305.5)
July Bean Oil closes 30 pts higher ($31.31), Aug 30 pts higher ($31.45) and Dec 29 pts higher ($31.91)
USDA announces 60 K T. old crop soybeans sold to unknown – 60 K T. new crop soybeans sold to unknown
Weekly Soybean Export Inspections – 277.3 K T. vs. 300-500 K T. expected
Weekly Soybean Crop Progress/Conditions – 83% planted vs. 81% expected vs. 79% 5-year average – 58% emerged vs. 59% 5-year average
Soybeans and soybean meal consolidate following last week’s minor short covering rally. Demand for old soybeans is better than anyone has expected for the current time frame but it has done little to sway the spreads. Monday was soybean oil’s turn to lead the products. I think a good portion of the soybean oil market’s price action was more in response to an oversold scenario rather than anything too fundamental. In recent days the entire soy complex had reached a decent state of oversold – in my opinion the market had run out of sellers for the time being. Like corn the latest COT report from the CFTC suggested one of the largest spec short positions. I find this very unusual for the current time frame. Granted we have a noticeable increase in acres but to build a short position of this size with the entire growing season ahead of us I have to think the spec has put the cart ahead of the horse.
All of the interior soybean basis locations that I track, if not steady, are a bit better vs. one week ago. The Gulf market too is running a bit better. Unfortunately none of this steady to better basis has done anything for the spreads as they continue to show a softer bias. If I had to guess which way the spreads move from here it would be higher. My rationale for this is that I think the trade is overstating the old crop carryout by a fairly large amount and that will cut into the new crop carryout. Currently old crop soybean sales are running 2.7 M T. ahead of the latest USDA projections. Yes, we may see cancellations in the remaining months of the marketing year but I believe that is contingent on the new crop’s start to the growing season.
So has the recent minor rally been enough for the soybean market? From last week’s low to today’s high was about 17 cents – normally corrections usually run about 20-30 cents? The meal market has corrected about $6.0. I would like to say we should see further upside correction but I’m having problems coming up with a good rationale other than the spec is too short. We are moving into a time frame where weather considerations make the market – current weather considerations appear to be non-threatening. Maybe the USDA Supply-Demand update scheduled for the end of the week may prompt some further short covering later this week.
Daily Support & Resistance for 06/06
July Beans: $9.10 (?) – $9.25
July Meal; $298.0 (?) – $302.5
July Bn Oil: $30.90 – $31.75

 

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