Non-Threatening Forecast Limits Upside in Soybeans

* Rains pushing across Corn Belt. Very scattered rain activity developed in eastern Nebraska and western Iowa overnight. These rains are building as they move across Iowa and southern Wisconsin this morning, although they remain scattered in nature. Rains are forecast to move into the eastern Belt and continue through the day. Below-normal temps are accompanying the rain event are expected to stick around through the bulk of next week. The long and short of it: The forecast is non-threatening, which will make it hard to generate buying interest in the soybean market unless there’s bullish demand news. * Soybean basis getting a lot of attention. Soybean futures rallied sharply Wednesday amid strong gains in Gulf basis, which touched off speculation China may be shopping for soybeans again. But interior basis declined sharply, suggesting the jump in Gulf basis may have been a case of an exporter getting caught short on needs. With waters on the Mississippi River reduced due to the drought, barges are not able to carry full loads, which could lead to some shipping delays and may leave supplies temporarily out of position. As a result, there could be wild swings in basis, including major differences in basis at interior levels and the Gulf as seen Wednesday. The long and short of it: Tight supplies should keep the cash market well supported, although a temporary drop in basis is likely when new-crop supplies start hitting the market. * Strong interest in Chinese state-owned soybean supplies. Chinese soy processors bought a record 402,375 MT of state-owned soybeans as prices were below international prices. With China trying to control edible oils prices, the government will continue to offer state-owned soybeans at a discount to international prices. The former head of China’s State Administration of Grain says the government has plentiful soybean stockpiles to meet demand needs. The long and short of it: Aggressive sales of state-owned soybean could curb demand for imported soybeans. But China has not shown a major resistance to current U.S. prices, signaling prices haven’t yet gotten high enough to greatly slow use.