USA: excellent harvest weather adds to bearish market tone

Higher energy prices have helped limit losses in the soybean complex.

Traders are taking notice of the excellent Midwest harvest weather seen for the next two weeks.

November soybeans closed higher yesterday as an early break to the lowest level since June 18 managed to hold as support.

The strong recovery in outside market forces helped provide some support, and the lack of new selling interest on the break to new lows may have sparked some short-covering.

Higher energy prices helped support a bounce in soybean oil, adding to the positive tone overall.

Increased concerns about the Chinese economy in the wake of problems at Chinese real estate developer Evergrande had sent several commodities lower, but those concerns have eased. China is the largest buyer of U.S. soybeans.

Talk of increased harvest selling pressure and ideas that the weather outlook has improved for getting the crop planted in Brazil have added to the bearish tone for soybeans. Brazil’s forecast this week calls for warm and dry conditions to continue, but significant amounts of rain are expected in central Brazil next week, which could help the crop get planted in a timely fashion.

U.S. weather looks ideal for harvest for the next two weeks.

Brazil soymeal exports were down as much in August after rapid deliveries during May-July. But, the latest line-up report indicates that exports will rebound in September. Argentinaí’ meal exports have remained at low levels, slightly above last year.

Market ideas

The November soybean futures’ price resistance level is at $12.82¾ and $12.88¾, with $12.45½ as the next support level. December soybean meal continues to consolidate, but it remains under the positive technical influence of the September 9 reversal.

The market is correcting an oversold condition, but if Argentina’s crush stays slow and U.S. exports remain firm, the recovery bounce could be significant. For the soymeal market, keep $347.50 and $351.30 as resistance levels. December oil resistance is at $57.00 and $57.86, with $54.07 and possibly $52.31 as next downside targets.

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Tags: June, China, weather, soybean prices, soybeans