November soybeans are trading 15 cents lower near 7:45 am cst. Soybean meal and oil are both trading lower this morning. There were 5 October soybean meal deliveries bringing the month to date total to 15. There were 251 soybean oil deliveries which brought the month to date total to 15,140. Malaysian Palm Oil futures ended the week lower after the Malaysian government announced that the new cut in export taxes for crude palm oil would not take effect until January 1st. Traders took profits as they expected a more immediate change in the policy. Hong Kong shares finished at multi month highs on the back of gains in banking shares and also because of lingering hope of more easing from the Chinese government. Even mainland Chinese markets were positive today and that action also seemed to be the result of ideas that the Chinese government was poised to provide more support for the slumping Chinese economy directly ahead. European markets were weaker this morning, as ongoing Earnings news disappointed investors and in turn kept slowing fears in place. However, a minor rise in Euro zone Industrial output for August should have provided European stocks with some lift. In the early action today US share prices were marginally higher, but not strong enough to signal a risk-on environment in the early going. Today the US scheduled report slate will present a US PPI reading that is expected to be a little hot, a private consumer sentiment reading and a Richmond Fed speech all in the morning trade.
November soybeans traded 46 3/4 higher at one point yesterday but failed to hold onto the substantial gains and instead closed well off session highs and failed to make a new high for the move. Volume was heavy with 349,123 contracts trading and open interest rose by 3,252 contracts. Total open interest in soybean futures is at 711,303 contracts which is off the record high at 833,271. The weaker trade overnight suggests the trade has mixed feelings on where the market should go from here given the lack of follow through buying in yesterday's trade. Chinese demand for soybeans and a historically tight balance sheet for the US are supportive however favorable weather in South America so far has limited gains.
The USDA pegged US soybean production at 2.86 billion bushels which was 101 million bushels above trade expectations and compares with the September estimate of 2.634. The initial increase in production was considered bearish but the report also showed an increase in domestic crush demand by 40 million bushels and exports by 210 million bushels to offset the increase in overall supply. The USDA reported ending stocks for 2012/13 at 130 million bushels which was right in line with market estimates. This puts the stocks to usage ratio at 4.5% vs. 4.3% last crop year. The market has a much better idea of the supply situation this year given that harvest is nearing completion but demand remains the main factor of support in the market and will likely continue to be until South American harvest begins. The increase in export demand was expected as the US continues to sell soybeans around the world at an explosive pace however some suggest more needs to be done given the US competiveness in the soybean and soybean meal markets through the end of this year and into the 1st quarter of 2013. The trade expects export sales to be reported near 800,000 tonnes this morning after reporting sales of over a million tonnes last week.
Basis levels continue to be firm around the Midwest but notable weakness has been seen in specific markets as harvest advances. The weakness is expected to be short lived as farmers have been delivering on open contracts but are reluctant to make new sales given the recent slide in prices. Decatur, IL basis was unchanged at 12 cents over the November contract and Burns Harbor, IN bids held steady at 35 cents under the November contract.
Rains have been favorable in Brazil this week and most forecasts call for rainfall in northern Brazil over this weekend. Central and Northern Brazil have been some of the drier regions so the rain would be very beneficial to row crops. The 6-15 day maps also show scattered showers for much of the region which should fill moisture deficits here and there. Argentina is mostly dry at the moment which might be beneficial given the heavy rainfall that they've received lately. Significant rainfall is expected to return next week with at least 2 more opportunities in the 6-15 day forecast. Despite the late start of planting for soybeans in some areas of South America, weather conditions for the most part have been favorable.
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