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Soybean 'Fall low' in sight

10/05/2012 @ 3:32pm

Closing Soybeans Commentary

Broker Perspective: After two exciting days, the soybean market put in what could be best described as a slow day. After trading both sides of unchanged the market ended unchanged on the session. Today’s trade was dominated by position squaring before the weekend.  It was announced this morning that we sold 180,000 mt of soybeans to China this morning. This sale reinforces our belief that the USDA will be raising their export estimate on next week’s report. Yesterday’s export sales number of 1.303 million tons were the largest exports since the week ending November 25, 2010 and surpassed all weekly sales of last year. We have now sold 82% of the USDA’s anticipated export number only four weeks into the marketing year. Next week’s trade will be focusing in on Thursday’s WASDE report. With revisions of planted acres, harvest acres and demand to the new crop estimate and finals adjustments being made to the old crop this report could be a game changer. Allendale is looking for the revisions to planted acres, harvested acres, and yield to net a 139 million bushel increase in production. Due to the current export pace we look for the government to raise exports 125 million bushels. We look for the crush number to be increased by 25 million bushels. We anticipate a 6 million upward revision to the feed, seed and residual category.  This will give us a net increase in demand of 155 million bushels. With the 139 million productions increase plus an additional 39 million bushels carry in increase due to the quarterly stocks report last week, look for total soybean supply at 2.962 billion bushels. With a demand estimate of 2.825 billion bushels we will end up with ending stocks at 137 million bushels. This is up 22 million bushels from last month’s estimate. After this week’s price action, closing 47 1/2 off of the week’s lows some are stating that the “Fall low” may be in place. We will have to get through next week’s report which is anticipated to be bearish to feel confident saying the fall low is in.

No Problems With Soybean Numbers: As the rest of the grain trade is in agreement with us on soybean numbers. Bloomber suggests an average production estimate of 2.763 billion and ending stocks increasing slightly to 135 from 115 million bushels.

Trade Recommendations:

Stand Aside

Lean Hogs Commentary

Yesterday and today may have marked an important turning point in this market. Cash hog prices declined in each of the past two days. Keep in mind this is about the right timeframe for us to expect a top in this market (normal 18 day bounce from September lows). While we are not yet starting sell positions, that will certainly be the next trade to look for. If you want to bullish from these prices keep in mind cash hogs normally only gain 6.8% on these small September bounces. This year’s run was 16%! Producers who missed out on our recommended sales earlier in the summer may want to consider getting some hedges on in the next two weeks.

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