Afternoon Soybeans: July options expire tomorrow, huge volume traded in $16 puts today.

The soybean market accelerated its decline with July and November futures each falling nearly 60 cents as part of a larger liquidation event that impacted the entire grain and oilseed trade.  

Crops are far from being made but the trend of the US weather forecast is moving in a slightly more favorable direction overall as we dial back the excessive heat and see some rains returning to the forecast for the first week of July. While dryness is an issue for many areas currently, the less threatening weather outlook is seen as good enough for now and the futures continue to shed risk premium.

In addition to the weather influence, the dramatic chart deterioration, slowing demand/soft basis, fund/spec liquidation, veg oil breakdown, and broader economic concerns are all weighing on beans. When you are coming from such lofty prices to begin with you also have the substantial downside risk that comes with that once the market feels it has adequately priced in all variables. It was only two weeks ago that front month beans challenged the all-time high in price. In doing so it helped cool off old crop export demand, weakened the basis and flat price has pretty much been in retreat ever since.

July options go off the board tomorrow, over 28k of the July 16.00 puts traded today which could make an attractive pin level for expiration. First notice on July futures, the quarterly stocks and planted acreage reports, and month/quarter end loom large on the 30th.

In the product trade, bean oil settled lower for the 10th consecutive session and now sits at a four-month low, 23% off from its contract high in the front month. Misery has company in the veg oils as canola fell by 7.5% today alone to a seven month low in the spot contract. In a possible silver lining that we have seen the worst, palm oil reversed higher with a 5.4% rally off a 6-month low. Veg oils have been in a free fall since Indonesia returned to the palm oil export market and there are concerns that governments may back off from their biofuel mandates although with the sharp drop prices that chatter may start to die down. Meal was not immune to the selling today as the front month dropped nearly $6 while remaining range bound on the chart, the December meal broke $12 and is threatening to break down its recent range on the chart.

July oil share settled 44.2% down from its peak settlement of 51.1%. July board crush gained 15 cents to 90 cents/bushel while new crop gave back a nickel to $1.41/bushel. Spot cash crush margins in C IL pencil out about a dime better than the board thanks to firming meal basis and weaker bean basis.

For tomorrow's weekly export sales report, the range of trade estimates for combined old/new crop corn sales is .500-1.2 mmt, wheat 150-400 tmt, beans -50-800 tmt, meal 100-350 tmt, and oil 0-25 tmt.

Elsewhere in the news, China's soymeal inventories have tripled in the last three months as large volumes of soybeans arrived in the country where demand for the animal feed ingredient is weak, analysts and traders said. The high stocks, combined with a global fall in soybean prices, pushed China's soymeal futures down nearly 6% on Thursday. The most active soybean contract on the Dalian Commodity Exchange closed down 5.5% to 3,891 yuan ($580.59) a tonne in the biggest daily decline since February 2013. China's weekly soybean meal inventories climbed by 14% at the end of last week from the previous week to 1.09 million tonnes, more than triple levels in late March, data from Mysteel, a China-based commodities consultancy, found.

Soybean Basis:
Location Spot
US Gulf off 9 to +90
Brazil Paranagua off 10 to +90
Sioux City, IA steady +25q
Mankato, MN steady +20q
Decatur, IL steady +40n
Claypool, IN off 10 to +50n
Columbus, OH steady +5n