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USDA report lacks trigger to buy, analyst says

Fund traders lighten up on long positions.

In the near term, the fact that the soybean market did not respond negatively to Tuesday’s bearish USDA report was viewed as positive and supported a higher opening this morning.

However, sellers have turned active. A drier forecast for central and southern Brazil suggests very active harvest into the weekend. Still, the main trend remains up. 

May soybeans closed higher on the session yesterday, and experienced a new contract high close. November soybeans gained on July and experienced a new contract high close as well. Talk that fund traders are shifting to a less-long position added a negative tone overnight. 

In yesterday’s USDA monthly supply/demand report, world ending stocks were revised slightly higher, but the reasons for the increase were increases in the production (+740,000 tonnes) and beginning stocks (+1.19 million) estimates and not a reduction in demand. World domestic consumption was revised higher by 1.47 million tonnes, which limited the ending stocks increase to just 380,000. 

U.S. 2020/21 soybean supply/demand numbers were left unchanged from February, leaving ending stocks at 120 million bushels vs. an average pre-report estimate of 117 million. This leaves the U.S. stocks/usage ratio at a record low. 

Brazilian soybean production came in at 134 million tonnes vs. an average trade expectation of 133.2 million, and Argentine production came in at 47.5 million tonnes, which was right on the average trade estimate. China’s crush was adjusted down by 1 million tonnes. 

The technical action for May soybean oil is impressive, with the market trading to new contract highs for the fifth session in a row this morning, so a lower close today might be a key reversal. Biodiesel demand was left unchanged at 8.3 billion pounds, while soybean oil exports were revised down by 150 million pounds. Ending stocks were revised slightly higher.

Market ideas

May soybean futures uptrend channel support from the November, December, and February lows comes in at $14.14 per bushel. Additional support comes in at $13.97 and $13.78. May soybean meal futures support is at $409.80 and then $402.40. 

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