Dry Weather Expands Into the Eastern Belt

[box type="download" icon="none"]Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets with trade ideas, take a Free Trial or find out more.[/box] The 2017-18 U.N. FAO soybean production estimate was raised 5.2 million tonnes to a near record level of 347.6 million tonnes on upward revisions for Brazilian and U.S. output. The Argentine Foreign Minister reported that the EU approved new duties in accordance with the WTO ruling against the anti-dumping that should open up the biodiesel market in the next few weeks. November soybeans traded up to 977 1/2 overnight, the market settled at 971 yesterday which is the highest settlement since August 9th. The trade continues to be concerned with the dry finish to the growing season that is limiting pod development. Yesterday's National Weather Service 6-10 and 8-14 day forecasts expanded the below normal precipitation area into the eastern sections of the corn-belt through September 20th. The temperatures should remain below normal over the entire belt for the same period.

The Canadian stocks report as of July 31st showed canola stocks at 1.35 million tonnes down 35% from last year's 2.09 million tonnes. The decrease was larger than the estimates of 1.5 million tonnes and left year end inventories at the lowest level in four years. The open interest in soybeans went down 4,981 contracts on Wednesday with soybean meal down 1,891 and soybean oil up 6,176 contracts. The average estimates from Bloomberg for next Thursday's USDA report has soybean yield at 48.7 bushels per acre. The range of estimates is 47.1 to 50.0 bushels per acre. This also compares to the August USDA estimate at 49.4 bushels per acre. A yield on the low end at 47.1 would leave ending stocks at 294 million bushels (6.8% stocks/usage) and would rally prices back to the 1020-1050 level. A yield at the high end of 50.0 bushels per acre leaves ending stocks at 551 million bushels (12.8% stocks/usage) and would take the market below the 900 level. The November 970 straddle priced at 45 cents with volatility at 15.3% seems a little cheap given the recent dry weather and a report next week.

TODAY'S MARKET IDEAS: November soybeans have closed above the 100 day moving average at 959 3/4 and looks to challenge the 200 day moving average at 981 3/4. The 200 day moving average provided solid support for the market all through the month of July and settled below it on August 1st and has never looked back. The slow stochastics are approaching overbought territory but the RSI is in neutral territory. A 50% correction of the July/August break leaves additional resistance at 984. The drier trend could get some short covering prior to the report next week. Support is seen at 967 followed by 959. The next upside target for December oil is at 36.59.