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Sunday Night’s Soybean Market Could Be Telling, Analyst Says

Previous Two Sunday markets have been up.

With no 8 a.m. sales or fund activity, some light Friday profit taking was expected and seen today.

It should be stressed that the setback was on light volume, as corn spent most of the day trading very calm. There are a couple reasons why Friday selling would be limited this week.

First, the main reasoning behind taking profits on Friday is from trade unsure of just what weather forecast they will return to on Monday, and that might not be as much of an issue with harvest expected to pass 70% on Monday.

An important second factor is that demand has remained strong. There is little reason to expect that to change next week. With the recent streak of exports remaining strong, there is no reason to assume on a Friday that it will fall apart next week. For these reasons, corn set back slightly, but maintained good support throughout the day.

Short-term corn traders should watch beans, Sunday night, to see if that market gains more strength again, as it has the last two Sunday night trading sessions. Longer term demand has essentially been at the top of the list, but after harvest passes 70%, it will certainly become the main factor.

Bulls

As long as demand continues strong, bulls should continue to have reason to expect the slow grind higher to continue. Funds were quiet today, but it is likely this afternoon’s report will show that more fund buying is needed to finish covering their short positions.

Bears

Resistance at $3.59¼ held again today, which should be the target for sellers to step in over the short-term. Sellers need to remain short-term traders: Unless ethanol and exports can show a multiweek setback, one week would not be enough.

Lean Hogs

With the Tar Heel, North Carolina, plant shut down through Saturday, the week’s run would be capped at 2.401 million head. Though it was over our 2.380 estimate, it is not good. Even with two or three plants running on Sunday, we have a few hogs waiting for their trip to the plant.

It is really important to point out when prices are not quite reacting as you would expect to supplies. The past two weeks have held clearly bearish news. The market is instead focused on the advertised reduction in hogs that should be coming. It will happen. The question is whether the decline will hit the trade’s expectation. We see the decline, for normal kill weeks, limited to 2.490 million. How much of a rally we should expect off that is the question.

No one at all feels comfortable with their supply guesses for mid-December (what futures are trying to guess), so a fundamentally based upside target of $44, $48, or $51 are simply guesses. That leaves you buying just because we are "coming off all-time lows." That is an OK reason for the short-term but still leaves us uneasy. Additionally, there is a small gap at 42.77 that may need to be filled. Though we are skeptical of how much of a rally this market can see in the short-term, we do suggest that December won’t be under $40.

Rich Nelson, Allendale Inc., 815-578-6161

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