May soybeans were trading 5 1/2 cents higher late in the overnight session. China futures were unchanged overnight. Palm oil futures in Malaysia closed up 0.7% overnight. Equity markets in Asia were generally higher overnight, with Shanghai stocks reaching a new 1 month high off positive leadership from the financial sector. European markets were weaker to start today, mostly off political wrangling within the IMF and perhaps because of the potential for political leadership changes in France. Early in the US trade today, share prices were slightly higher with the markets shifting their focus toward another round of corporate earnings reports later this morning. The US economic report slate today is mostly empty, with a weekly ECRI report the only scheduled release today. However, there could be a series of reactions off an ongoing IMF meeting and a G20 Finance Ministers/Governors meeting.
A weaker USD and some strength in gold and energy market overnight helped to support higher trade. Declining South America production estimates and strong demand from China have been the primary supportive forces on the recent rally. In addition, the outlook for a very tight ending stocks situation for the 2012/13 season without a significant jump in acres from the March USDA estimate has helped to support active buying from speculators and record open interest. Argentina cut its production estimate for the 2011/12 season to just 42.9 million tonnes as compared with 44 million as their previous estimate and compared with 45 million as the last USDA forecast. The market closed slightly higher on the session yesterday but down sharply from the early highs. More China buying of US old crop soybeans plus a surge higher in corn sparked buying. Private exporters reported the sale of 110,000 tonnes of US soybeans to China for the 2011/12 season. Weekly export sales for soybeans came in at 1.219 million tonnes which was sharply above trade expectations. Old crop meal sales were 300,700 metric tonnes. Sales of 82,000 metric tonnes are needed each week to reach the USDA forecast. Oil sales were 23,900 metric tonnes which was also well above expectations. Sales of 7,000 metric tonnes are needed each week to reach the USDA forecast.
If we boost planted area by 2 million acres and see a trend yield of 43.4 bushels per acre, ending stocks come in near 114 million bushels with a stocks/usage of just 3.4% which would be a record low. It will take record yield or even a larger boost in plantings or weaker global demand to avoid tightness. The 11-day set-back from the highs may have been enough to correct the overbought condition and a resumption of the uptrend for November soybeans leaves 1421 3/4 as next target.
SOYBEANS (JUL): Daily stochastics turning lower from overbought levels is bearish and will tend to reinforce a downside break especially if near term support is penetrated. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The market has a slightly positive tilt with the close over the swing pivot. The next downside target is 1399. The next area of resistance is around 1432 3/4 and 1446, while 1st support hits today at 1409 1/4 and below there at 1399.
StockMarketNews Research Team