Soybean Bulls Fear Reduced Chinese Imports
Today’s Spotlight Market
While large speculative accounts remain overall net-long the Soybean complex, we have seen a sharp drop to the long position of late. The most recent Commitment of Traders report shows non-commercial traders shed over 14,500 net-long Soybean positions during the reporting period ending September 1. This reduced the overall net-long position to 9,746. Both Soybean Meal and Soybean Oil also saw a large reduction in large speculative long positions, with a decline of 10,756 and 3,835 contracts respectively.?? ?
Fundamentals
Soybean prices have been in a slump since July as overall weakness in commodity prices combined with estimates for a better than anticipated U.S. harvest have seen the new-crop November contract shed nearly $2 per bushel from the summer highs. Now, it appears that weakness in Chinese economic growth will spill over into U.S. grain exports to the world?s most populous nation. The USDA is estimating China?s 2014-15 Soybean imports at 76 million metric tons. This is nearly 1 million metric tons below earlier estimates as economists believe that a fair portion of Chinese soybean imports are being used to add to government controlled stockpiles as opposed to meeting actual end-users demand. While the USDA still expects Chinese Soybean imports to rise to 78 million metric tons for the 2015-16 marketing year this is still below earlier estimates.
While estimates for Chinese demand are still in flux, grain traders will be awaiting the USDA forecast for U.S. production on Friday with the release of the September Crop Production and supply/demand report. Private forecasters are still reeling from the USDA crop estimate in August in which government statisticians forecasted average Soybean yields at 46.9 bushels per acre and a crop of 3.961 billion bushels. This estimate ran contrary to pre-report estimates for production to total near 3.775 billion bushels with an average yield closer to 45 bushels per acre.
While market opinion is generally in agreement that the USDA was too ?optimistic? in its crop production and yield estimates, historically we do not see large revisions in the September report as the USDA prefers to wait until actual harvest totals start to be reported before making significant updates to its estimates. So it may not be until October 9 with the release of the October crop report before traders get a better feel for how this season?s Soybean crop fared.
Technical Notes? – View Today’s Chart
Looking at the daily chart for November Soybeans we notice prices starting to consolidate near the 875.00 level following the steep sell-off that started in mid-July. However, the market remains well below both the 20 and 200-day moving averages and momentum, as measured by the 14-day RSI, is reading a relatively weak 40.80 as of this writing. We do note that trading volume has become light the past two weeks as it appears that traders are lightening up on positions ahead of the upcoming USDA report on Friday. Support is found at the ?spike? low of 855.00 made back on August 24. Resistance is seen at the recent high of 888.50 which occurred on August 31.
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