January Soybeans were trading 6 cents higher near 7:30 am cst. Palm oil futures in Malaysia slipped lower overnight for the second straight session as traders cited concern over slowing demand. After some initial weakness, Chinese equity markets righted the ship to log a mostly positive trading session. The Hong Kong market managed to reach a 2 month high today, while the Shanghai composite managed to reject its lowest trade since the beginning of 2009 and then managed a return to positive territory. European shares clawed out minor gains early on, but the markets were a little surprised with suggestions from Germany's Merkel that the ESM Stability fund might need to be expanded. Apparently hope for aid payments to Greece remains in place but unsettled and that has left sentiment in the Euro zone mostly balanced. Early US equity market action was mixed, as the markets remain somewhat off balance after comments from the Fed yesterday afternoon that suggested they lacked the tools to deal with a fall over the fiscal cliff. Today the US will release initial and ongoing claims, with claims expected to rise slightly. Also due out today are a weekly mortgage application survey, a Bloomberg Comfort Index, a Michigan Consumer sentiment report, leading indicators and some weekly energy statistics.
Firm calendar spreads, strong interior cash basis, and a modest recovery in the technical outlook provided a boost to futures this morning after prices eased overnight. The strong recovery effort yesterday was seen as a short term positive for the market but more work is needed to see a shift in momentum and market sentiment. Yesterday's volume was reported at 134,806 contracts and OI increased by 5,315 contracts. The surge in prices along with the rise in OI suggests new long positions in the market. Very little news has been seen out of Washington DC this week in regards to progress on the Fiscal Cliff which in effect has added a positive tone to the outside market picture. However, comments yesterday by the Federal Reserve Chairman suggesting very little could be done "monetarily" if no deal is reached by political leaders sent stocks lower. Despite the bullish fundamental influences in the soybean market, the comments suggest that very strong outside market headwinds remain which could dampen new buying enthusiasm in the short term, or at least until year end.
Chinese officials confirmed on Wednesday that it would stockpile soybean grown domestically at an average price of 4,600 Yuan per tonne, or roughly $740 per tonne. This is equivalent to $20.14. The stockpiling program will end on April 30, 2013 and state warehouses will be required to accept as much soybeans as farmers can sell. Chinese October soybean imports were reportedly up 5.79% on the year and January through October imports are up 16.6%. Soybean oil imports surged 82.7% on the year and January through October imports up 47.3%. There are rumors that China has bought 4-5 cargos of US soybeans off the PNW coast the last couple of days which favors the bull camp.
Argentina has heavy rainfall in the forecast for the middle of this week followed by another period of dry weather. Central and Southern Brazil will see rain into this weekend. Both of which should improve soil conditions and help move along the planting pace. The rain in Argentina is expected to delay planting once again and some analysts suggest that farmers may plant additional soybean hectares.