Soybeans and the Sudden Death effect

Weekly Grains Analysis

Soybeans (CBOT:ZSX14)

The new crop beans tested both ends of last week’s range to begin the week. Initial weakness was seen on the overnight market while the strength came during the day session. Late in the session the new crop beans managed to take out last week’s highs (filling a gap on the chart) but were not able to close above them.

The September beans and meal contract continue to find strength on the tight old crop supplies. As harvest moves north we would look for the old crop cash market to weaken as more beans come available. I had a customer near Covington, Indiana report that harvest of some beans would begin in his area next week.

There continues to be talk of Sudden Death affecting some areas of the Midwest but we do not believe it is wide spread enough to have a major effect on the nations yield.

Friday’s commitment of traders report showed that the funds were short 21,940 contracts which was biggest short trade position since 2006. In 2006 they maxed their short position out with about 55,000 contracts. In China last night, their weekly auction of government stocks saw 132,135 tonnes of soybeans purchased out of the 337,539 offered. This would imply a 39% participation rate, above the 30% from the previous week. Weather continues to be viewed bearish as the warm wet forecast will allow for the bean plants to add pods and fill them out to the max.

The trade was anticipating crop ratings to stay stable tonight at 70% G/E. The five-year average for this date is only 55% of the crop being rated g/e. The actual ratings counter seasonally improved by 2 points and are now rated 72% g/e. Allendale continues to look for beans to fall to the $9.50 area when the fall low is scored and would recommend not chasing rallies and for producers to sell into a price rally if it were to occur. Allendale will release the results of our 25th annual crop survey tomorrow morning.

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