Afternoon Soybeans: Heavy price action on limited volume to start the week.
The soybean market led a break in the grains today following a weekend of needed rains falling across portions of the central to eastern belt to help alleviate concerns over dryness that had been building since early July. The weather forecasts keep rain in the picture through the end of the month and should be supportive to yield potential, whatever that potential may be due to late plantings on a significant percentage of the crop. Trade volume was very thin.
The Pro Farmer crop tour is underway this week and will try to shed some light on production potential with many doubting the USDA's optimistic take last Monday. Individual field yield estimates, pod counts and pictures posted by the crop scouts are already floating around but a final tour estimate will not be available until Friday.
The crop progress report showed soybean conditions off by 1 to 53% gte compared to 65% this time last year, pvp was up 1 to 14%. The trade was expected steady condition ratings on average. The crop is 90% blooming compared to 82% last week and 99% this time last year. The crop is 68% setting pods compared to 54% last week and 90% this time last year. The crop remains way behind developmentally.
The states that saw the greatest improvement week over week were NC (+7% to 62% gte) and SD (up 3 to 56 gte). The states that saw the greatest deterioration week over week were AR (-4 to 55% gte), IA (-2 to 61% gte), KS (-2 to 48% gte), KY (-4 to 41% gte), MO (-3 to 44% gte), TN (-7 to 74% gte). The states that have the largest % of pvp are where you would expect with IL (20% pvp), IN (26% pvp), MI (20% pvp) and (OH 24% pvp).
Weakness was felt across the soy complex although meal held on slightly better than soybean oil to win the least ugly award today. The break in oil is partly due to a correction underway in the broader veg oil space led by palm oil which closed -1.6%, in line with today's soybean oil slide. The recent rally in the veg oil space was driven by Chinese demand to replace domestic production lost in a smaller crush amidst African Swine Fever.
There is money flow at work helping to influence things where funds were huge buyers of +47k contracts of oil as the market peaked. This showed in the COT report where managed money flipped their position from a sizeable short to a small net long of 10k. Futures open interest on Friday was up a significant 13.7k but the price action didn't offer much clue as to whether those were new longs or new shorts coming into the market, or both. The question in oil becomes, now that the fund has blow out of his short, is there enough fundamental fuel to revive the rally in veg oils, or have we seen the highs for now? Stay tuned.
Weekly grain inspections for export came in better than expected for beans at 1.158 mmt vs. 850 estimated. Beans inspected for export marketing year to date stand at 43.485 mmt compared to 54.613 mmt this time last year. This represents a shortfall to last year's export inspection pace of 409 million bushels - the USDA is currently projecting year over year exports to fall by 434 million bushels. In the breakdown, there was another 9 cargoes of beans being shipped to China, 7 out of the Gulf and 2 off the PNW along with a cargo of sorghum loaded out of the gulf.
While the trade war keeps new sales of US beans to China on hold for now, the currency and basis in Brazil is doing what it can to encourage the farmer to plant as much as possible. Brazilian fob offers show +145 while the real futures sunk to a 2.5 month low. Weakness in the currency futures adds to the producer's profit margin in that country and would encourage increased plantings.
CIF bids at the Gulf up 1 to +41. Interior processor bids steady. Brazilian fob steady +145. Argy fob steady +75.
In the spreads, the soybean bull spreads were weaker. Oil share was weaker to 32.8%. Board crush margins 2 better to $1.04/bushel.
Soybean option ATM volatility -mixed.