November soybeans are trading 2 cents lower near 7:30 am cst. September soybean meal is higher while oil is lower. Malaysian Palm Oil prices rebounded overnight and recovered from a two-week low as US soybean markets rose yesterday. Chinese equity markets were weaker again overnight extending a pattern of recent declines. European stocks also started out weaker again this morning, as Euro zone Consumer Confidence fell to some of the lowest levels in 3 years. Surprisingly, the Euro saw only marginal lift in the wake of suggestions from Chinese officials that they would purchase Euro bonds. At least initially, the US equity markets were marginally weaker, which might have been the result of suggestions from Moody's that the Euro area crisis continues to pose the greatest risk to the global economy. However, with the Fed's Jackson Hole symposium capable of generating some headlines later today, the markets attention might shift forward to the Bernanke speech on Friday.
November soybeans saw a brief setback overnight after Chinese markets dropped at 8 pm cst, however since then they have climbed off session lows. Continued buying interest by China and fears of declining new crop soybean yields has been supportive to price action. Some analysts suggest that the average US soybean yield could fall 1-2 bushels per acre below the recent USDA estimate due to recent heat and low levels of precipitation in the western and northern parts of the US Corn Belt.
Hurricane Isaac has moved over the Gulf Coast and is now traveling at a pace of 5 mph and blanketing the affected regions with torrential rainfall. Areas of Arkansas, Missouri, Illinois, and Indiana could see 4-7 inches of rainfall over the next 5 days. While the heavy rain may drastically reduce soil moisture dryness, it could also negatively impact the quality of soybeans. Some areas of the deep south may see 20 inches of total rain and with just 18% of Louisiana harvested, 9% of Mississippi, and 8% in Arkansas, the risk of acreage that has not been harvested seeing heavy losses is high. Furthermore, temperatures in parts of Iowa, Nebraska, Kansas, and South Dakota reached 95-100 degrees yesterday. The continued heat stress could mean yield deterioration in these areas.
Cash basis for processors in Midwest have been steady to slightly lower this week as traders anticipate new crop bushels coming to market soon. Crush margins remain positive, near 50-60 cent per bushel. Short term rallies in the basis may be seen over the next week as heavy rainfall moves north and interrupts the delivery of farmer soybeans to facilities. Gulf of Mexico values were steady to slightly lower with the Port of New Orleans shut down due to the Hurricane, which has increased barge freight values.
Traders expect China to remain active in the US export market for the remainder of this year but activity has been relatively quiet this week. South Korea purchased 22,000 tonnes of non-genetically modified soybeans overnight, for arrival in November and it is being reported that Vietnam has bought 20,000 tonnes of soy meal from Argentina for September shipment.
*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.