Morning Soybeans: Weather Outlook Still in Bull Camp but Meal Overbought
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January soybeans have closed higher for seven sessions in a row and the market has now reached the halfway mark of the June 7 to November 9 break. While this leaves the market overbought technically, the weather outlook over the next seven days looks very dry for southern Brazil and Argentina, and there are some scattered rains for central Argentina in week two of the forecast. This leaves a bull camp with an edge. With the January soybean contract yesterday vaulting through its 200-day moving average and finishing near its highs of the day, additional whether premium is likely to be interjected into prices ahead. However, stressed crop areas in Brazil and Argentina are spread out and some areas are in good shape. For example, Brazil's Parana region saw its soybean production estimate reduced by 12% because of dry weather.
In fact, output for the region is expected to fall by 7% from last year with average yields down by 7.7% on a year-over-year basis while planted area increased. As usual, La Nina chatter seems to stimulate speculative buying interest with most US grain prices returning to the vicinity of price level seen during US crop problems earlier this year. Strength is not isolated in soybeans with palm oil yesterday posting a one-week high on flooding in Malaysia with some industry sources projecting production to have declined by 11% in the first 20 days of December. Forecasts for Argentina show isolated showers and temperatures near to above normal with conditions drying out over the weekend and temperatures trending warmer. For the weekly export sales report, traders see soybean sales near 700,000-1.7 million tons. Meal sales are expected near 50,000-250,000 tons and oil sales are expected near 50,000-75,000 tons.
TODAY'S MARKET IDEAS
The dry weather in South America will likely be the driving force for a continued advance over the near term but 7-days straight leaves the market in an overbought status. January soybean support is at $13.06 and $12.95, with $13.65 1/4 as next resistance. January oil support is at 53.61, with 56.48 as next key resistance. January meal is showing extreme overbought readings on short-term technical indicators. This leaves the market vulnerable to a more significant technical correction. January meal support is back and 381.20.
