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Soybeans Market Analysis

May soybeans were trading 4 cents higher late in the overnight session. China futures were higher following a holiday closure. Palm oil futures in Malaysia were weaker because of big picture macro economic issues. Asian equity markets were mostly weaker overnight but the Shanghai equity market recovered to close in positive ground. European stocks were mostly weaker overnight from ongoing Spanish fears and perhaps because of soft German numbers. In the wake of the recent tamping down of US QE hopes, the scheduled US data might take on even more importance to the grain markets. In other words, the US economy might have a higher bar of expectations in the wake of the news early this week that the US Fed might have moved to the sidelines. Therefore today’s initial claims and Friday’s Non farm payroll results look to have a noted influence on soybeans and other physical commodity markets directly ahead.
From the recent high, November soybeans have “given back” roughly 20 cents a bushel and yet it is still unclear how many acres soybeans might end up losing to corn. Weather through the weekend would seem to leave the odds high, that corn will get the benefit of early planting efforts and for many analysts that should continue to underpin soybean prices. While many want to discount the fast shipment pace of soybeans to China, as unsustainable, it should be noted that Chinese soybeans last night gained 1.7% after a recent holiday closure. It should also be noted that some of yesterday’s buying in the US was reportedly sparked by concerns that crop losses in South American might be set to expand further. Last night South Korea bought 25,000 tons of soybeans and was thought to be interested in another 25,000 tons. Also Taiwan’s BSPA reportedly bought 60,000 tons of Brazilian beans overnight. Some might suggest that the higher action in China was simply catch up to the gains seen in the US earlier this week but many traders still think that Chinese import demand will be closer to 57-58 million tonnes for the year, as compared with the USDA estimate of only 55 million and last season’s imports of 52.3 million tonnes.
Expectations for Exports today in Soybeans are centered on 600,000-800,000 tons, as compared to last week’s tally of 592,300 tons. Exports for Soymeal are seen at 50,000-130,000 tons with 145,300 tons seen last week. Exports for Soyoil are seen at 5,000-19,000 tons as compared to 3,500 tons last week. While the need for a much
as 1-3 million acres “more” soybeans remains in place for the new crop, a Chinese holiday could have dented imports and buying recently and it also seems as if outside market forces today are slightly bearish to start the Thursday trade. However, if the weather allows for a fast pace of corn plantings and demand remains near 3.4 billion bushels for the coming season, that could leave beginning stocks near 245 million bushels. With this demand and even a jump of 2 million acres from Friday’s USDA estimate, a trend line yield of 43.4 bushels per acre (41.5 last year) would leave ending stocks at just 92 million bushels, or at a record low 2.7% in stocks to usage. It is no wonder that a number of analysts and the United Nations FOA think prices will rally early in the 2012 crop cycle.
One can’t rule out some minor weakness to start today, but we have to think that November soybeans will see fairly solid support down at $13.70, unless of course the outside market environment really deteriorates and in turn that action takes the focus away from what will more than likely be an extremely tight condition in soybeans in the coming quarters. Rain events in the mid west don’t look to prompt any significant barrier to road gear planting of corn and we would not expect the Chinese to be overly timid in securing additional supplies, especially if there is any further weakness in soybean prices directly ahead.

Technical Analysis

SOYBEANS (MAY): Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving average. The upside closing price reversal on the daily chart is somewhat bullish. The market tilt is slightly negative with the close under the pivot. The near-term upside target is at 1440 3/4. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1430 1/4 and 1440 3/4, while 1st support hits today at 1408 3/4 and below there at 1397 3/4.

 

StockMarketNews Research Team

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