November soybeans are trading 4 1/2 cents lower near 7:30 am cst. Soybean meal is trading lower while oil is up 0.16. There were no October soybean meal deliveries bringing the month to date total to 10. There were 550 soybean oil deliveries which brought the month to date total to 14,663. Malaysian Palm Oil futures traded higher overnight and ended at the highest levels in more than a week. The market appears to be range bound for the moment as traders struggle with rising vegetable oil markets and rising palm oil stocks. Chinese stocks were mixed overnight, as Shanghai shares managed a slight rally, while the Hang Seng finished a touch lower. Apparently some shares in China were lifted as a result of talk of fresh government subsidies that could stimulate rural auto sales. European markets were weaker to start today in the wake of growing concerns of soft earnings in that area. US stocks were also a touch lower in the early going perhaps because Alcoa kicked off the earning cycle yesterday with a loss. Residual weakness in the Euro this morning might be another element weighing on gold prices early today but that action could be accentuated in the event that US wholesale inventories decline and the US Fed Beige book release later today, highlights the weakness that prompted the Fed to take aggressive action in their last meeting. There will also be two Fed speeches today, but the earliest speech isn't scheduled to begin until late in the afternoon.
The soybean market comes into the morning with a negative tilt after yesterday's gains were all but erased and November soybeans settled near the lows of the day. Global markets slid overnight and fears that corporate earnings could disappoint investors forced the US Dollar higher which created a bit of long liquidation in the soybean market. The dollar pushed lower on the day into this writing and outside forces improved. Volume in the soybean market has been impressive all week and yesterday's volume was recorded at 217,995 contracts and open interest declined by 6,534 contracts. The heavy volume along with declining OI suggests traders took profits on recent gains ahead of tomorrow's USDA report.
The Malaysian Palm Oil Board reported that palm oil stocks surged 17.4% from the August estimate overnight. The rise in stocks exceeded expectations of 2.46 million tonnes. Prices rose following the reports after sinking near a new 3 year low last week. Traders noted that short covering has moved markets higher this week as traders await a decision from the Malaysian government in regards to a cut in their current export tax. The surge in palm oil stocks and positive outlook for exports could create long term headwinds in the soybean oil market.
For the report Thursday morning, the trade is expecting a US average soybean yield near 37 bushels per acre vs. the September estimate of 35.3. Production is expected to rise to near 2.75 billion bushels vs. 2.63 in September. The likelihood of an increase in the US soybean yield for the report is well known at this point. Some believe an increase of 1.5-2 bushels per acre is already priced. Many in the market also believe that any increase in the average soybean yield and production will be offset slightly by increases in demand. A production estimate near 2.75 billion bushels and an increase in demand of 150 million bushels would still imply 2012/13 ending stocks at 130 million bushels and a stocks/usage ratio of 4.6%. Further demand rationing will likely be required if this scenario unfolded.
The weekly Soybeans Harvest report showed 58% of the harvest is complete compared to 41% last week and 42% last year. The 10 year average for this time of year is 42%. The previous highest percent ever completed was 55% in 2000. Conditions continue to be favorable for harvest in the west but rainfall is expected in the area later this week which could disrupt activity. Basis has risen this week as harvest enters its final stage. Reports suggest farmers are delivering on existing contracts and bringing the rest of their supply back to the farm. Davenport, IA river bids rose by 3 cents per bushels to 17 under the November contract while most other areas were steady. Decatur, IL bids were unchanged at 12 cents over the November contract but there were rumors that soybeans traded at 30 cents over the November contract in Central Illinois yesterday.
The weekly Soybeans Conditions report showed 37% of the crop was rated good/excellent compared to 35% last week and 56% last year. The 10 year average for this time of year is 58%. The highest percent rated good/excellent was 78% in 1992 while the previous lowest estimate was 38% in 2003. The recent rise in good/excellent conditions supports the view that soybean yields are slightly better than current USDA estimates of 35.3 bushels per acre.
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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