March soybeans traded slightly higher overnight but have come under pressure as of this writing. Corn and wheat have both moved into negative territory which has pushed soybeans well off their overnight highs. Malaysian palm oil futures climbed to a 5-week high on expectations for strong demand and as a monsoon resulted in flooding across key production regions. Chinese equities were generally lower during overnight trading, with the Shanghai A Share Index down 0.60%, as China's housing ministry was expected to keep property curbs in place during 2013. Japanese share prices remain fairly strong, with the Nikkei 225 reaching a new 21-month high due to the extended weakness of the Yen. European stock markets are posting mixed results this morning, with Italian shares up more than 0.50% as their election season swings into high gear. US fiscal cliff fears continue to impact sentiment in a number of markets. In US today, the markets will see Initial and Ongoing Jobless Claims, Consumer Confidence and a new home sales release. While the main focus might be on the Initial Claims headline figure, the most important result of the day might be the Consumer Confidence report, as that effectively kicks off the cycle of US reports for the month of December.
Once again, another solid round of export data failed to spark a move higher in the soybean market as traders continue to liquidate long positions ahead of the New Year and look ahead to a very large South American soybean crop. The weather in Brazil is largely benign at the moment with showers favoring Southern, Central, and Northern Brazil this week. Northeastern Brazil is trending drier. Growing regions in Argentina will dry down the next 5 days with normal precipitation patterns expected as we move into January. A closely followed private analyst cut his Argentina crop production estimate to 54 million tonnes, down from 55 million tonnes. The USDA is estimating Argentina production at 55 million tonnes. Market views on Argentina's production capabilities are varying as the weather has been wetter than many would have liked which has caused significant delays to planting. Brazil production prospects remain positive with nothing to suggest a cut in the USDA forecast of 81 million tonnes and many are beginning to actually increase estimates.
Reports suggest Indonesia could produce 27.05 million tonnes of crude palm oil in 2013, up from 23.52 in 2012. Bearish production prospects in Indonesia and Malaysia are seen as long term negatives to soybean oil prices. Weekly cash palm oil prices remain at a significant discount to weekly cash soy oil prices. The spread may be narrowing a bit given the rising prices in Malaysia due to the recent monsoon that has caused flooding throughout some of the growing region.
Export Inspections beat market estimates yesterday and were considered positive to price direction but bears sold into the rally. Furthermore, the USDA announced that US exporters sold 115,000 tonnes of soybeans to China and 108,000 tonnes to an unknown destination for the 2012/13 marketing year. Inspections for the week ending December 20th were pegged at 44.5 million bushels vs. 36.9 last week. Inspections needed each week to reach the current USDA estimate are 16.7 million bushels, down from 17.4 last week. The highly supportive demand side data failed to boost prices and some of the selling pressure may have been linked to thoughts that a Longshoremen Union strike is imminent. The PNW Union voted down a new proposal by 93% which threatens the loading and shipment of vessels out of some terminals which generally moves cargo to Asia. Reports yesterday afternoon suggest that vessel loading will continue for now and no immediate strike is planned. Out of the 44.5 million bushels shipped as of December 20th, 4.8 million bushels, or just under 11% of the total weekly shipments were loaded through the Columbia River and Puget Sound for mainland China.
*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.
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