Twice last week soybeans rallied from the quarterly stocks September 30 low to the 50- and 200-day moving averages at 9.73 basis November. However the rallies both times were short-lived as record crop sizes as harvest expands are being reported across the Midwest. For now rallies are being sold. However consistent rains that have delayed harvests in parts of Iowa, Minnesota, and Wisconsin have led to fears of lower production and decreasing yields in those areas. It was enough to spark some buying interest over two sessions (Monday 10/3 and Friday 10/7) but not enough to extend rallies above key technical resistance at the 9.73 level. The weekly harvest update showed bean harvest at 26 percent complete versus 10 percent last week and 36 percent last year. Condition ratings though continue to impress with 74 percent of the crop rated good to excellent, up one percent on the week. Private analysts keep raising soybean yield with some forecasts calling for beans at 52.5 BPA on next week’s WASDE report. Average analyst estimates are coming in at 51.5 BPA. It’s a tug of war with the battle between a burgeoning supply versus insatiable demand from China. Although China was thought to be out the market due to the week long holiday there, a purchase from “unknown destination” for 258K metric tons was announced mid-week. Unknown in the market is spelled C-H-I-N-A. It seems dips below 9.60 and 9.50 have prompted more Chinese purchases for future shipment. Export sales this week showed net sales of 2,179,600 million metric tons for the week ended September 29. China accounted for 1.8 million of the weekly sales total. Just as in August where China was buying at a frenzied pace, it appears they are buying aggressively again especially on price dips into the beginnings of harvest.
This Wednesday’s WASDE report could be a big one especially if the USDA confirms these private forecast yield estimates above 52 B.P.A. However if the USDA comes in at or near unchanged from last month’s report (50.6) for a report day surprise, we could see a significant move higher, most likely up to 995.0 basis November. On the flip side, if the USDA comes in on the high end of expectations, ending stocks would soar over 500 million bushels which would pressure trend and index following funds to liquidate their long positions in the market potentially sending soybeans to new lows below 9.34 basis November. To be protected on both sides of the market use an option strangle for exposure on both sides of the market. Into Wednesday’s crop report look to buy the November 930 put and at the same time buy the November 10.00 call for eight cents or $400.00 plus all commissions and fees.
Technicals
For November beans support is down at 9.43 and with a close under 9.30 is next. Resistance is up at 9.72 and then 9.88. For December corn support comes in first at 3.33 and then 3.27 Resistance comes in at 3.47 and then 3.56. For December wheat support comes in at 3.87 and then 3.80. Resistance is up at 4.05 and then 4.16.