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258067

May Soybean Trade Collecting Firepower

April's soybean market was muted.

We ended the week / month’s soybean trade on a rather muted note.

For the week, the July contract lost4 ½ cents while the same contract lost ¾ cents for the month. Today was first notice day for the May contracts, and there were 1,015 contracts delivered. This was above the trade’s expected range of 200 to 500 contracts. The bigger-than-anticipated deliveries were viewed bearish. 

Soybean oil deliveries were 1,442 contracts compared to expectations of 400 to 1,500 contracts. Meal delivers were 303, within the 0-to-300 range of expectations.

The trade was talking about a Reuters newswire article highlighting a story about Chinese consumers showing some resistance to GMO soybean oil for cooking purposes. This put pressure on the oil market today.

The story notes a Nielson consumer survey showing 70% of respondents have limited or avoided some specific products with GMO ingredients, which included soy oil. Supermarket sales of soybean oil were down 1% last year while other cooking oils grew by 2% to 6%. Chinese consumers have grown wary of many food products after the past few years of highly publicized food health scares.

At this time, we do not see any problems with imports of whole soybeans. Importers are buying soybeans for the soymeal. This does suggest that one part of the crushing process may be seeing lower revenue streams in the future, which could hurt crush margins.

In other news, analysis firm AgRural, estimated that Brazil’s farmers have sold only 49% of the newly harvested soybean crop. That is under the 63% five-year average and is the lowest sale rate in seven years. This is potentially bearish as it means that they have a lot of beans to move on any uptick in price at the same time the U.S. producers have excess supplies of beans left to sell.

The Buenos Aires Grains Exchange estimated the soybean harvest at 32% complete. That is an increase over the previous week’s estimate of 16%. The exchange pointed out that “Thanks to the high yields of areas harvested so far and good weather forecasts over the short term, it is possible that the season will end with a bigger crop than currently estimated.”

The exchange currently estimates the crop at 56.5 million tonnes. USDA currently has the country pegged at 56.0.

Weather watchers will be watching to see if the much-anticipated heavy rains fall as advertised this weekend. The forecast continues to call for heavy rains (4- to 6-inch totals in some locations.) If the rain falls as advertised depending on follow-up rains, it could push additional acres into beans.

With both the domestic and world balance sheets looking bearish, we continue to encourage traders / hedgers to take advantage of any bounce that might materialize as we anticipate more downward pressure. Our in-house pricing model projects the market to work its way down to an early-summer low of $8.84 basis the November before we see our traditional summer bounce. Sundays open will be dictated by the trade’s reaction to this weekend’s rains, the CFTC funds position, and the extended forecast.

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Rich Nelson
Allendale Inc.
815-578-6161
This material has been prepared by a sales or trading employee or agent of Allendale Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Allendale’s Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
 
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The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Allendale Inc. believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.
 

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