Soybeans Fall on Fund-Led Selling Amid Fundamental and Technical Factors

November 13, 2012 12:16 AM

What Traders are Talking About:

* Soybeans break sharply. Soybean futures followed up last Friday's heavy price pressure with another sharp selloff yesterday. Fundamentally, traders are still talking about the higher-than-expected U.S. production estimate, along with the increase in projected U.S. and global soybean carryover. Improved Brazilian weather also gets some of the "blame" for the sharp selloff in soybean futures. Needed rains fell on northern production regions of central and eastern Brazil last week and more rains are in the 10-day forecast. At the same time, drier conditions are being seen in southern Brazil. Technically, soybean futures triggered active sell stops as key support levels were breached. January soybean futures have now retraced more than 62% of the rally from the June low to the September high. Since Nov. 1, funds have been aggressive sellers, dumping 33,000 contracts (165 million bu.) of soybeans. For perspective, that's 25 million bu. more than projected 2012-13 soybean carryover.

The long and short of it: Soybeans are in a free fall that's being driven by fundamental and technical factors, and led by aggressive fund selling. The price slide will likely continue until end-users (read that China) aggressively buys soybeans, signaling prices have fallen far enough.

* Decision on Ukraine wheat exports expected soon. Through Nov. 12, Ukraine has exported 4.78 MMT of wheat with another 617,000 MT ready for near-term shipment, according to a letter from the country's ag minister to exporters. That's nearly equal to the 5.5-MMT cap Ukraine's government and exporters have agreed to for 2012-13 exports. As a result, a decision is expected soon on whether Ukraine will ban exports, as officials have previously stated. Ukraine's ag minister has said Nov. 15 would be the start of the export ban, while other officials have indicated Dec. 1 and some have said no ban would be enacted.

The long and short of it: Exportable supplies are quickly dwindling, making the official decision on whether to ban wheat exports more of a talking point than a fundamental factor.

* China to raise corn, bean stockpiling price. China will soon start stockpiling corn and soybeans from domestic producers at prices well above year-ago. A source familiar with the situation tells Reuters China will pay 4,600 yuan ($731) per ton for domestic soybeans and 2,100 to 2,140 yuan ($334 to $340) per ton for corn, up 15% and 7%, respectively from year-ago.

The long and short of it: The corn price is a non-factor as it's below global corn prices. But with the soybean price above the domestic market price and that of imported soybeans, it means Chinese farmers will sell to the government and crushers will continue to import soybeans.



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