November soybeans are trading 16 1/2 cents higher near 7:30 am cst. Soybean meal is trading 4.20 higher while oil is up 0.88. There were no October soybean meal deliveries bringing the month to date total to 10. There were 820 soybean oil deliveries which brought the month to date total to 14,113. Malaysian Palm Oil futures traded to their highest level in more than a week as traders covered short positions ahead the Malaysian Palm Oil Board's stocks report Wednesday. Chinese stocks were higher overnight as investors in that region were temporarily emboldened off renewed signs of stimulus from the PBOC. European markets were somewhat supported off dialogue from the ECB overnight with some officials relieved by the efforts of Greece to get control of their economy. However, the IMF discouraged some commodity buyers overnight with a downward revision in global growth forecasts. Indian equities were higher today especially because of a visit from a visit by the US Treasury Secretary and by US Fed officials. US equities were weaker this morning, as the trade has started to look ahead to a less than stellar kick off to the next US corporate earnings cycle. The US economic report slate remains relatively thin today, with a series of 3rd and 4th tier private surveys and chain store sales reports due out. After the surprise decline in the US unemployment rate last Friday, the Employment Trends Index release today might garner some added attention.
Soybeans received a nice technical bounce overnight after seeing modest declines yesterday. Volume was recorded at 202,699 contracts and open interest nudged 800 contracts lower. Support overnight was linked to news that China would inject 42 billion dollars into money markets to stimulate their economy and on thoughts that they will continue to be a buyer of US soybeans into 2013. It's also being reported that China will continue to sell 400,000 tonnes of state reserves per week to help boost domestic supplies and contain inflation. Some traders believe this could be a supportive feature in the soybean complex over the long term as these domestic supplies will need to be replenished over time.
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 in this Thursday's report is widely accepted by market participants and some in the trade believe the recent slide in prices reflect this adjustment already. 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.
Basis bids for soybeans were steady yesterday as futures slipped lower and farmers backed away from any new sales on hopes that prices will move higher later this year. The Harvest Progress report was delayed yesterday due to Columbus Day but traders expect the US soybean harvest to be near 60% complete when released later this afternoon. Basis in Decatur, IL was unchanged at 12 cents over the November contract while bids on the river in Davenport, IA increased by 6 cents to 20 cents under the November contract. In addition, Morris, IL river bids increased by 2 cents to 3 cents under the November contract. The stronger basis on the river along with active bull spreading in calendar spreads suggests strong demand for soybeans and adds a positive tilt to the soybean price outlook going forward.
Weather has improved for dry regions of South American. Central and Northern Brazil is expected to see better rainfall this week which should benefit dry soil conditions. More favorable weather conditions in Brazil and Argentina could be a drag on soybean futures in the near term.
*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.
Copyright CME Group All rights reserved.