Afternoon Soybeans: Strong nearby demand not enough to stave off global supply side realities.
<div class=\"default-font-wrapper\" style=\"line-height: 1;font-size: 12pt; font-family: Verdana, Geneva, sans-serif;\">The soybean market collapsed with new contract lows established in all contracts beyond the top step January contract. January beans settled 12.75 lower and sits just above its contract low from August. The Jan-March bull spread traded out to a new high at a 7.5 cent carry despite the flat price weakness. The spread is supported by nearby demand, strong basis, and a post-harvest price level that is tough to incentivize fresh cash selling interest. <br> <br>There was plenty of positive demand news around this morning but it was not enough to stave off fund/chart selling, fears of a tariff war, and perhaps most significantly, the bearish implications of the global supply side of the balance sheet. Conditions in the Southern Hemisphere to date have not given us any reason to doubt the record crop projections. The USDA currently sees combined bean production out of Brazil, Argentina, and Paraguay increasing by 29 mmt or 8.9% year over year to a record 231.2 mmt. The function of the market at this point is to take prices low enough to encourage stronger demand and to discourage bean acreage in the US next spring. The new crop bean to corn ratio sits at 2.30%<br> <br>In the product trade, the bean oil liquidation continued as part of a broad based global veg oil sell off. January bean oil settled nearly 2.5% lower, January canola settled 3.5% lower, February rapeseed settled 3.9% lower, and February Malaysian palm oil settled .9% lower. The premium of palm oil on the board to bean oil widened to a new high at $200/mt which I believe is a record. Funds appear to be liquidating their bean oil length as evidenced by open interest coming off. Tight domestic inventories remain fundamentally, but uncertainty over future government tax incentives is the trigger for getting to the sidelines in the futures. Meal settled lower but has developed a near term sideways trade with support from the oil share spreading and a deeply oversold technical posture that is trying to correct. US meal remains overpriced in the world cash markets despite the sharp losses on the board. Board crush margins dropped by another 3 cents to $1.19/bushel. <br> <br>Weekly export sales were solid all-around led by soybeans, which exceeded their range of expectations, including a marketing year high in shipments. At 8 am, the USDA reported private sales of 198 tmt of beans to China, 135 tmt of beans to unknown, and 133 tmt of meal to the Philippines. <br> <br>Old crop soybean sales of 1.861 mmt were up 20% from the previous week, but down 7% from the prior 4-week average. Increases primarily for China (1.197, including .611 switched from unknown and decreases of .014), Mexico (.169, including decreases of .070), the Netherlands (.143, including .120 from unknown), Germany (.132), and Indonesia (.097 from unknown), were offset by reductions for unknown (.097), Israel (.055), Italy (.005). Exports of 2.448 --a marketing-year high--were up 5% from the previous week and 1% from the prior 4-week average. The destinations were primarily to China (1.508), the Netherlands (.143), Germany (.132), Indonesia (.101), and Taiwan (.100).<br> <br>Marketing year to date, soybean sales plus shipments total 31.584 (1.160 bb) which is 9% higher than last year’s pace at this time. Total commitments represent 64% of the USDA’s project total for the year compared to the 5 year average for this date of 67%. China holds 4.2 mmt in open bean commitments on the books compared to 5.2 mmt this time last year, exports to China stand at 10.5 mmt compared to 10.8 mmt a year ago.<br> <br>Old crop meal sales of 275 tmt were down 9% from the previous week, but up 3% from the prior 4-week average. Old crop oil sales of 22 tmt were up 33% from the previous week, but down 48% from the prior 4-week average. <br> <br>December options expire tomorrow. Next week we have Thanksgiving holiday followed by first notice on December futures the next day on Friday the 29<sup>th</sup>. That means longs will need to be out or rolled by Wednesday's close to avoid delivery risk so we could see some volatility in the markets around this delivery cycle. There are currently 114 deliverable corn receipts registered with the exchange, zero srw, 5 hrw, 369 bean oil, and 76 meal. <br> <br>Elsewhere in the news, EPA data shows the US created about 1.27 billion ethanol (D6) blending credits were generated last month, compared to about 1.21 billion in September while credits generated from biodiesel (D4) blending rose to nearly 784 million in October from about 768 million in the prior month.<br><br>Indonesian palm oil association Thursday reported the country's September palm oil stockpiles rose to 3.02 mln mt at the end of the month, up +23% over the previous month's stockpiles. However, the group noted palm oil exports fell by 30% to 1.86 mln mt in September. They noted top buyers, China and India, pulled back on their purchases by more than a third.<br> <br>The export duty on sunflower oil from Russia may increase by 200% in December compared with November, and by another 50% in January compared with December, amid a steady increase in prices for vegetable oils, which supports sunflower oil prices.<br> <br>Soybean Basis: <br>Location Spot <br>US Gulf off 1 to +91 <br>Cedar Rapids, IA steady -5f<br>Mankato, MN steady -5f <br>Decatur, IL steady +5f <br>Decatur, IN steady opt price f <br>Columbus, OH up 5 to -5f </div>