Pre-Opening Soy Complex Market Report 11/05

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November 6, 2012 1:38 AM EST

January Soybeans were down 7 1/4 cents near 7:30 am cst. There were 601 deliveries issued Friday night for the November contract which pushed the total for the month to 2,277 contracts. Malaysian Palm Oil futures fell to a 3-week low overnight as surging stockpiles continue to limit the upside potential for prices in the short term. Chinese shares were weaker perhaps because of spillover influences from the US stock market slide at the end of last week. European stocks also tracked the weakness seen in the US at the end of last week overnight. However, the FTSE was also under some fresh pressure today because of some weak UK services data. In addition to the US election, the markets are also looking ahead to a Chinese leadership shift later this week. In Athens Greece there will be a vote Wednesday on austerity measures and there are fears that the measures will not pass. Ahead of the Greece vote, there will be two days of general strikes. In the US action today, the market will see an ISM Non-Manufacturing Report and an employment trends Index.

Negative outside markets and fears that the USDA make increase the US average soybean yield and production on this Friday's USDA report are pressuring futures to start the week. The long liquidation from last Friday continued overnight as the supply outlook grows more favorable with some in the market penciling in a 50-70 million bushel increase in production. Support is coming from a strong demand from China and a staggering export pace. Export sales for the week ending October 25th were pegged at 741,000 tonnes which is nearly 550,000 tonnes over the pace needed each week to reach this crop years USDA estimate. Last Friday's volume was recorded at 147,647 contracts and open interest saw a decline of only 1,680 contracts. Considering the magnitude of the selloff Friday, the modest revision in OI suggests commercials and end users may have been active buyers on the dip in prices.

The Commitments of Traders reports as of October 30th showed Non-Commercial and Non-Reportable combined traders held a net long position of 179,063 contracts, up 3,227 for the week. Trend-following funds (Non-Commercial net of index funds) held a net long of 136,066 contracts, down 1,853 for the week. In soybean meal, Non-Commercial and Non-Reportable combined traders held a net long of 80,609 contracts, up 7,402 for the week. These same traders held a net short of 29,132 contracts in soybean oil, up 6,159.

Southern Brazil and Argentina weather remains too wet while Northern Brazil is too dry. Some farmers in Argentina suggest that close to 11 million hectares, just over 27 million acres; have been affected by the above normal rainfall in Buenos Aires. Some analysts are penciling in a 3-6 million tonne decline in Argentina soybean production from the current forecast of 55 million tonne. A wetter forecast is expected for central and northern Brazil this week while drier and warmer weather is set to enter southern Brazil and Argentina. Both weather events would be considered a short term negative to prices if they develop.

Basis remains strong in the interior US market and in the Gulf of Mexico. November barges were indicated near 88 cents over the January contract Friday and December barges traded 90 over. Basis in the Gulf of Mexico this time last year was near 60 cents over Jan and the 5-year average is near 50 over. Burns Harbor, IN bids jumped 3 cents per bushel to 25 cents under the January contract and Decatur, IL held steady at 17 cents over. Meal basis was flat to end the week but crush margins remain healthy across the Corn Belt.

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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.

Copyright CME Group All rights reserved.

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