Soybeans Rallying On Tight Old-Crop Supplies

May 17, 2013 01:15 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are trading 1 to 2 cents higher, soybeans are 6 to 10 cents higher in old-crop contracts and 2 to 4 cents higher in new-crop contracts and wheat futures are fractionally to 2 cents lower. Overnight trade suggests bulls will have the upper hand on the open this morning, especially in soybeans. Cattle futures are expected to open with a mixed tone this morning, while hogs are called steady to firmer.


* Soybeans working on big weekly gains. May soybean futures expired without much fanfare earlier this week, but July beans have taken over lead-month status with a flurry of buying activity. Tight old-crop supplies are the catalyst for the buying. While tight supplies are not new "news" and demand (both exports and crush) has eased from earlier levels, the demand pull is strong enough to keep basis very strong and the focus on the tight supply situation. July soybean futures pushed above the key 200-day Moving Average overnight, which should attract fresh speculative buying.

The long and short of it: While old-crop soybeans are rallying, a push toward tough resistance at the top of the extended, choppy trading range would be an opportunity to trim old-crop inventories as the $14.60 to $!4.80 level has turned back multiple rally attempts dating back to last fall.

* Brazil's congress passes port modernization bill. A bill that would likely boost private investment in Brazilian ports and the hiring of non-union workers cleared Brazil's House and Senate Thursday. The country's president now has 15 days to sign it into law, which is very likely to happen. Earlier this week, union dockworkers at Brazil's three main ports, including the key grain ports at Santos and Paranagua, staged a temporary walkout to protest the bill as they believe this will hurt their efforts to get better pay and working conditions.

The long and short of it: If Brazilian dockworkers decide to stage a prolonged work stoppage due to this bill, it would be potentially highly supportive for soybean futures. As for now, the threat of a prolonged strike is adding to the price support in old-crop soybeans.

* Rapid planting pace weighing on corn. While soybean futures are rallying, corn futures are struggling to find buying interest as planters are actively rolling across the Corn Belt. Depending on how widespread the weekend rains are, corn planting should be 60% to 65% complete as of Sunday. Some believe corn planting could challenge the weekly record of a 43-percentage-point jump in 1992, which would put planting progress at 71% or more as of Sunday. As a result of the very rapid progress this week, traders don't have concerns with corn losing acres to soybeans due planting delays. Traders also feel the heavy spring precip will help build a record crop this year.

The long and short of it: With corn planting delays no longer a major concern, the corn market is going to have to be pulled higher if there's going to be a rally.


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