November soybeans traded sharply higher overnight and are trading 43 cents higher near 7:30 am CST. Soybeans surged on the 5 pm open in gap and go fashion. A warm and dry weather outlook for this week offered support following last week's corrective move. Malaysia palm oil futures pushed near a 1 week high. Asian Shares were weaker overnight, with the Shanghai market settling within close proximity to 3 year lows. European shares saw some initial gains in the wake of hopes for easing from the ECB but that optimism wasn't extended into the early US equity market action. Evidence of ongoing slowing was seen in the Euro zone this morning and there continues to be talk of yet another critical credit market show down in the Euro zone into the September time frame. The US scheduled report slate today is somewhat active with regional Fed manufacturing data due out and some tacit expectations for QE3 periodically popping up in the headlines. While gold and silver might garner some minor lift from significant strength in grain prices, the inflation story is mostly curtailed because of a lack of definitive forward motion in the global economy. The focus on adverse weather conditions and their effect on row crop yields have now completely shifted from corn to soybeans. Weekend showers moved through nearly a 1/3rd of the US Midwest, dropping.50-1.50 inches of rainfall. The brief pullback in temperatures and restricted rainfall is expected to provide relief to soybeans but a return to 90-100 degree temperatures for half the Midwest this week will continue to stress the drier areas. Temperatures will remain warmer and drier the next 11-15 days, with the hottest temperatures felt in Nebraska, Kansas, Missouri, southern Illinois, and southwestern Indiana. Adding support is a 6-10 and 11-15 day weather outlook that shows above normal temperatures and below normal rainfall for areas west of Illinois. Restricted rainfall in the northern US Delta is also adding to soybean stress. While the market continues to believe there is a glimmer of hope for soybeans if weather changes by the middle of August, the time frame is narrowing quickly. A mid-August change in weather would likely help soybean size but recent stress has already aborted pods in some regions and continued stress will limit the number of beans per pod. Yield estimates have already begun to drop with the most recent forecast near 38 bushels per acre for the national average. The issue with the soybean balance sheet is figuring out where and how to cut demand exactly. Soybeans continue to outpace the current USDA export estimates and the outlook for robust demand going forward is likely, following the smaller than normal South American harvest. The updated crop conditions report will be released this afternoon. The trade expects a 1-2% drop in soybean ratings after better rainfall moved through the eastern Midwest last week. The Commitments of Traders Futures and Options report as of July 24th for soybeans showed Non-commercial traders were net long 245,445 contracts, a decrease of 11,043 contracts. Non-commercial and Non-reportable combined traders held a net long position of 242,043 contracts. This represents a decrease of 14,491 contracts in the net long position held by these traders. The decrease in length was anticipated after open interest in soybeans shifted lower on the weaker trade last week. Trend-following funds (Non-commercial traders net of Index Funds) decreased positions by 10,795 contracts, and now hold a net long position of 210,629. The report also showed soybean meal positions for Non-commercial traders were net long 76,947 contracts, a decrease of 8,020 contracts. Non-commercial and Non-reportable combined traders held a net long position of 97,830 contracts. This represents a decrease of 8,768 contracts in the net long position held by these traders. Lastly, positions for soybean oil showed Non-commercial traders were net short 11,153 contracts, an increase of 3,049 contracts. Non-commercial and Non-reportable combined traders held a net short position of 8,781 contracts. This represents an increase of 4,013 contracts in the net short position held by these traders.
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