A tranquil session today in the soybean market, with soymeal taking a backseat to oil. The nearby soybean spread May 15 vs. July 15 strengthened even with abundant total U.S. supplies in the picture. We have now seen Chinese imports lagging the year-ago pace for the last three consecutive months, with the cumulative seven-month import number clocking in down close to 700,000
tons from one year ago. To catch up, China will have to import 35.3 mmt of soybeans for the remainder of the year (up a steep 14% from the 30.9 million from last year), in order to match the USDA forecast. The trade is anticipating the USDA to forecast a generous (near 475) new crop bean carryout in next Tuesday’s S&D report, and this number of course will be likely to take into account a vigorous 46 bu/acre yield estimate from the Ag Forum. Keep in mind that the USDA’s August first initial soy yield estimate has only eclipsed 45 bu/acre one time (which was last year), and whether the trade is willing and able to maintain this booming production estimate as we move forward into this year’s growing season is yet to be seen. Funds tallied up being short 15,000 beans, long 4000 meal, and long 31,000 oil, which lacks any clear picture as to sentiment at these historically lower price levels. Look for Tuesday’s S&D report to possibly add more bearish conviction to this market. Please take note that the May 2015 soybean contract expires May the 14th 2015.
Technically, in the July 15 Soybean contract volatility remains at close to yearly lows (setting up an attractive risk / reward entry). Values still trading under all key moving averages (20, 50, 100 – day), continually testing the 20 day but being repelled. The long term trend remains down, although possible chart structure is starting to indicate a possible higher low bottom if prices can hold above the $9.60. If price can rally and close above the $9.90 price level this could open the door to a sustained upside move. Short term support is currently 9.60 with resistance remaining at $9.90. A 50% retracement from last year’s high to Octobers lows would put us right at 11.11.
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