November soybeans are trading 5 cents lower near 7:30 am cst. September soybean meal and oil are lower as well. Malaysian Palm Oil prices dropped overnight after traders expect palm stocks in Malaysia to rise near 2.3 million tonnes. There were no soybean or soybean meal deliveries overnight but 1,676 contracts of soybean oil were delivered. Chinese equity markets were lower again overnight off of bad earnings and fears towards the upcoming PMI report that is scheduled for release over the weekend. Some equity market measures in China have now seen negative action for four consecutive months! European stocks started higher this morning, off of more calls for ECB easing and perhaps off hopes of supportive dialogue from the US Fed later today. US stocks have also started out higher in anticipation of the Bernanke speech today. Out from the US today, is Factory Orders and the Consumer Sentiment Survey from University of Michigan but the focus of the US trade is likely to be locked onto Jackson Hole.
The soybean market fell overnight after Chinese stock markets opened up sharply lower for the second straight night. Soybeans continue to be caught in the headwinds of a slowing Chinese economic outlook, but this is being offset by the high demand of China imports of US Soybeans. Yesterday's volume was pegged at 181,347 which is lower than average, however volume in most commodity and equity markets has been below average this week as the holiday weekend approaches. More importantly, open interest rose by 6,956 contracts as November soybeans posted a new record high. A robust export sales pace and fears that the soybean crop in the west is deteriorating continues to offer strong underlying support to the marketplace.
Soybean futures may have also seen pressure overnight after basis for soybeans on the Mississippi River were weaker yesterday as Gulf of Mexico premiums dropped. Domestic processor values also slipped as new crop harvest ramps up before heavy rain moved north into harvest ready areas. The pressure on calendar spreads this week, along with weaker domestic basis levels is could be considered a negative influence in the short term.
Hurricane Isaac is slowly advancing towards the northwest and is blanketing Arkansas and southern Missouri with rain at the moment. The storm has been moving at a pace of just 5-6 miles per hour and the 1-5 day forecast calls for 4-6 inches of rainfall for Arkansas, Illinois, and Indiana. Harvest progress will unfortunately be delayed in these areas. Temperatures this week in Nebraska and South Dakota have reached 100 degrees and now wildfire alerts have been issued for areas of Northwest Nebraska. South Dakota and Nebraska have seen below a quarter inch of rainfall in the last two weeks. The high heat and lack of rainfall has left topsoil conditions above 90% short/very short while ratings in states like Kansas, Illinois, and Indiana have fallen off the highs. The late heat and lack of moisture suggests soybean plants in these areas could face further yield downgrades.
While the tone of the market is certainly bullish going forward, the bear camp argues that price gains could be pressured after Brazil's soybean crop is expected to reach 82 million tonnes next year vs. 66.4 million tonnes this year. World importers continue to be buyers of South American soybeans beyond March 2013 at a sharp discount to US prices, but the short term outlook remains positive as traders anticipate robust demand for US soybeans to finish out 2012.
*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.