Mon 19 Aug 2013 07:22:26 CT
September and November soybeans are each trading 23 cents higher at 7:10 am cst. Meal and oil are higher as well. Dalian soy is marginally lower overnight. Hong Kong shares were weaker overnight, while mainland China shares were higher off expectations of positive Chinese earnings news flow ahead. The Nikkei was higher in the wake of positive July Import and Export news, as that news temporarily distracted the markets from recent Japanese tax policy moves and increased US tapering fears. European shares were lower to start today despite very strong investment flows into European funds last week, but investor focus into the opening this morning was apparently put off balance because of ongoing concerns toward Egypt. US equities were marginally higher to start today but a lack of important scheduled data and mixed action internationally overnight might leave the US trade searching for a fresh fundamental focus early this week.
A warm and dry weather trend will stretch across the US Midwest this week which favors the bulls along with the strong technical developments. Farmer sales were light last week as most have already cleaned out their bins and many farmers remain unsure about their yield potential at this point so sales will slow until more is known over the next 7-14 days. The trade expects crop conditions to deteriorate significantly from last week. The 5 day map offers close to no rainfall for the heart of the Midwest and temperatures will edge into the high 80 to low 90 range. The southeast and delta are set to see showers and the next shot for meaningful rainfall in the Midwest is next week. For now the market is focused on the 5 day which offers limited moisture relief. The warmer temperature trend should help speed up crop maturity however. Soybean vs. corn spreads continue to edge into new contract highs as the soybean balance sheet simply has very little room for error on the supply-side. The USDA already cut 500,000 acres vs. the FSA forecast of over 1 million going to preventative plant. Export demand remains extremely strong for the new crop year and it's likely that supply increases going forward will be offset with slight demand increases. The USDA cut 88 million bushels from demand in the August report, 65 million of which was carved out of export demand. Sales remain well above year ago levels and the 5 year average pace. The USDA announced another round of new sales last Friday for a total of 410,000 tonnes to China and unknown destinations. About 284,000 went to China and the balance to unknown.
The Commitments of Traders Futures and Options report as of August 13th for soybeans showed Non-Commercial traders were net long 59,980 contracts, up 14,250 contracts for the week. The Commercial traders were net short 16,756 contracts, up 19,785 contracts and this represents a change from a net long to net short position. Non-Commercial and Non-reportable combined traders held a net long position of 16,756 contracts and these traders flipped from a net short to a net long position. Trend following funds (Non-Commercial net of Index Funds) held a net long position of 13,153 contracts, up 14,349 for the week and shifted from a net short to a net long position. The soybean crop remains in question while the trade has some moderate definition into the outlook for the corn crop. This will keep fund money in play to the long side, particularly since the weather over the next week is bullish short term. The deferred spreads for new crop remain extremely bullish but some might say overbought. The Nov/July, Jan/March, and Jan/July all made new contract highs overnight. The weather premium being added along with strong export demand is supportive. For meal, Non-Commercial traders were net long 28,331 contracts, up 6,452 contracts for the week. Non-Commercial and Non-reportable combined traders held a net long position of 41,615 contracts, up 7,758 contracts in their net long position. Trend following funds held a net long position of 10,430 contracts, up 5,823 for the week. For oil, Non-Commercial traders were net short 47,814 contracts, down 7,713 contracts for the week. Trend following funds held a net short position of 69,388 contracts, down 7,820 for the week. Fund traders were holding a record short position in the oil market in the last reporting period but the oversold chart conditions and the bullish NOPA report due to a stock decline below year ago levels could keep the market well supported in the short term.
India's soybean production is likely to rise this year due to favorable monsoon season rainfall. Output was estimated to rise by 18% to a record 13.34 million tonnes in 2013/14 according to a government official. This could trim imports of edible oil imports this year which would be timely given the slide in the Indian rupee which makes it more expensive to import oils. The rupee hit a record low against the US Dollar this morning. Malaysian and Indonesian palm oil exports into India could suffer in the year ahead if the harvest is as big as advertised. Malaysian palm oil traded up to their highest levels in over a month along with India soybean oil. The higher trade was linked to the supportive action in US markets.
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