Soybeans In a Free Fall

November 11, 2012 11:58 PM

What Traders are Talking About:

* Soybeans plunge. Soybean futures posted very sharp losses last Friday in reaction to USDA's bigger-than-expected rise in crop size and projected 2012-13 carryover. In the process, major chart damage was done as support at the October lows was violated. Soybean futures followed that up with more active selling pressure overnight. While USDA's report is the catalyst for the sharp selloff, improved South American weather is helping fuel selling pressure. Dry areas of central and eastern Brazil got needed rains last week and more are in the 10-day outlook, while southern Brazil dried out. Conditions are still much too wet in Argentina.

The long and short of it: Funds are leading the selloff in soybeans, aggressively dumping long positions. Fund activity will indicate when futures have fallen far enough.

* Chinese trade data encouraging. China's trade surplus swelled to a 45-month high of $31.99 billion in October, up from a surplus of $27.67 billion in September as exports outpaced imports. Chinese imports rose 11.6% from year-ago last month, while imports increased only 2.4%. While the overall import data was a little disappointing, Chinese soybean imports remained strong at 4.03 MMT last month. While that was down 19% from September, it was 6% above year-ago. Through the first 10 months this year, Chinese soybean imports are 16.6% greater than last year at 48.34 MMT.

The long and short of it: China's trade data is encouraging as it's further evidence the world's second largest economy is perking up. But with Europe continuing to struggle, there are still concerns Chinese exports could take a hit.

* Veterans Day reminder. Government offices are closed today in observance of Veterans Day. As a result, the bond market is also closed, but other markets are open and will observe normal trading hours. Due to USDA offices being closed today, weekly export inspections and crop progress data is delayed until Tuesday.



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