Soybean Fundamental Support
The bean market found some strength to begin the week. There seemed to be multiple stories that gave traders reasons to buy. Reports that 8000 March 880 puts were abandoned after Friday’s option expiration gave the market a boost Sunday night.
If the options were exercised, it would have put the option holder short the market at the $8.80 level. With them choosing to not take the short position the trade took it as bullish.
News stories that six provinces in Argentina were declared flood emergency areas by the government had traders adding weather premium into the market. The areas affected rated by size of grain production are Cordoba (#1 at 38%), Santa Fe (#3 at 14%), Entre Rios (#4 at 5%), Chaco (#7 at 2%), La Rioja, and Corrientes. More rain is seen this weekend and again mid-next week.
At this time, Allendale believes that the market’s reaction is an overreaction as a record crop out of South America still seems likely. In additional news out of Brazil, the oilseed industry organization, Abiove, lowered its soybean crop estimate down from 99.4 million tonnes to 98.5 (still a record crop). They also lowered the soybean export forecast from 55 mt to 54.5.
The latest USDA estimate put the crop at 100.0 mmt and exports at 57.0 mmt. The USDA’s weekly export inspections were viewed friendly coming in at 1.531 mmt which was above the trade’s estimate of 1.1 to 1.4 mmt. We have now shipped 1.375 million bushels which is down 9.4% from last year.
The USDA export target is 1.690 billion bushels down 8.3% from last year. We will need to ship out a little over 10 million bushels a week to reach the USDA export goal. It looks like the market will continue its sideways chop as it hard to come up with something that will break it out of its range. Bearish news seems to be priced in but there really is nothing to chase the bears out of their position either.
We continue to recommend producers should use rallies near the $9.00 level to sell. The USDA's annual outlook conference, the Ag Forum, will be held on Thursday and Friday. Their acreage estimates will be released Thursday morning. The detailed outlook of supply, demand, ending stocks, and pricing will be on Friday.