November soybeans are trading 15 cents lower near 7:30 am cst. Soybean meal and oil are lower. Malaysian Palm Oil futures dropped to their lowest level since September of 2010 as rising inventories continue to weigh on prices. Chinese equity markets were mixed overnight with Hong Kong shares weaker and only minor gains seen in the Shanghai composite. Violence at a Foxconn plant in China and ongoing diplomatic tensions with Japan were probably detracting from the weak economic outlook in China at the start of the new trading week. European equities were also off to a slightly weaker start today, as fears or slowing and ongoing anxiety toward the situation in Spain had investors a little concerned. The European markets might also have been put off balance by the German Ifo report which showed the climate for business in Germany sagged again for the fifth straight month in a row. US stocks were also showing weakness to start, perhaps because of the weak European data, or perhaps because of lingering weakness in many physical commodities, as declining commodities can hint at a risk-off environment. A couple regional US Fed activity/outlook surveys are due out later this morning and those reports are likely to give the markets some additional direction.

The soybean market continued its trend lower on heavy fund liquidation ahead of this Friday's Grain Stocks report. Reports of better than expected soybean yields continue to weigh on prices and negative outside market influences have added to the downside momentum. Bear spreading is also adding the nearby pressure on prices. Last Friday's volume was reported at 186,163 contracts which was average at best but saw a decline in open interest of 4,893 contracts which suggests further profit taking by major long position holders.

The Commitments of Traders reports as of September 18th showed Non-Commercial traders were net long 214,309 contracts, a decrease of 19,493 contracts for the week and the long-liquidation selling trend is seen as a short-term negative force. Trend-Following Funds (Non-Commercial net of index funds) now hold a net long position in soybeans of 174,413 contracts which is down 20,356 contracts from the week prior. The largest long position ever held by these traders is 224,822 contracts. The sharp decline in long positions reflects a $1.82 drop from the November soybean high of 1789. In soybean meal, Non-Commercial and Non-Reportable combined traders held a net long of 87,836 contracts, down 4,917 contracts for the week. Non-Commercial and Non-Reportable combined traders held a net long of 53,356 contracts in soybean oil which represents a decrease of 11,603 contracts for the week and here again, the selling trend is negative.

Favorable weather conditions in South America have added ammo to the bear camp this morning. Weekend showers were seen in parts of Mato Grosso and Matto Grosso Do Sul. More rainfall is expected this week and in the 11-15 day period for northern Brazil. The change to more favorable weather conditions has made it possible for farmers to begin planting this year's soybean crop. An executive for a large commercial trading company expects Brazilian soybean production to reach 82 million tonnes which is 1 million tonnes higher than the current USDA estimate. The executive also stated that they expect China imports to fall to 56 million tonnes in 2012/13 vs. 59 million tonnes last year. The USDA currently projects China soybean imports at 59.50 million tonnes. It was also reported overnight that a South Korean feed maker bought 30,000 tonnes of US soybean meal for January delivery.

The basis in the Gulf of Mexico remains firm and was last quoted at 83 cents over the November contract for November shipment. Rumors continue to swirl that China has bought 12 or more cargos last week on the dip in prices. Decatur, IL soybean bids were unchanged at 15 cents over the November contract. Most in the trade see soybean harvest to be reported at 15-20% complete vs. 10% last week.


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