Morning Futures Roundup

Global Buyers Cannot Get Enough Soybeans

   Fundamentals
After recently trading at lows not seen since July, Soybean futures prices have begun to rebound as some analysts are starting to believe that prices will need to rise in order to ration demand. China remains the largest consumer of Soybeans and even current high prices have not curtailed its appetite. Chinese soybean imports were up 20% in September from last year, totaling nearly 5 million metric tons.

U.S. Soybean exports are already running well above the pace expected by the USDA, with just over 70% of the 2012-13 forecasted export sales already on the books. With the South American Soybean Harvest nearly 6-months away, the U.S. remains the main provider for Soybeans to the export market. This is problematic as the U.S. crop was disappointing this past season due to the severe drought that swept across the central portions of the U.S.

Tight global soybean supplies is encouraging U.S. producers to hold on to recently harvested Soybeans in hopes of higher prices, as supplies become even tighter just prior to the South American Harvest. This tightness of new-crop Soybeans -could be reflected in the basis, with buyers willing to pay a premium over the 5-year average to obtain supplies.

Some traders believe that the market has not yet priced-in a weather premium for South American production, as there is little room for a disappointing crop out of Brazil and Argentina this coming season. Though some analysts are anticipating record production from South America, we must remember this was also the case for U.S. production this past season, and no one really knows what Mother Nature could have in store.

   Technical Notes
Looking at the daily chart for January Soybeans, we notice prices once again moving above the 20-day moving average ("MA"), which is an important signal for short-term momentum traders. Even during the most recent $3 plus price slide, prices were not even close to testing the longer-term 200-day MA.

The 14-day RSI has rebounded from nearly oversold levels to a more neutral reading, currently at 48.85. Recent lows of 1486.25 look to be support for January Soybeans, with resistance found at 1673.00.

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About Mike Zarembski

Born in the grain pits of the Mid-America Commodity Exchange (MidAm) in the early 1990s, Mike's futures career soon shifted to the offices of TD Waterhouse in 1999, followed by Xpresstrade in 2002 and eventually optionsXpress in 2007.