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Fundamental Review Analysis of Soy Complex Futures

NOPA released US bean crush at 124.77 mil bu for Aug’12 month, which is lower than average trade estimate of 128 mil bu as well as Jul’12 crush of 137.38 mil bu. However, it is higher than previous year August crush of 118.77 mil bu. With this crush number, overall 11/12 MY US bean crush is estimated to be near 1705 mil bu, which is equal to the Sep’12 WASDE estimate.
Soybean and Meal futures remained under pressure amid progressive succumbed to harvest pressure, but Soy oil futures borrowed external support from fresh gains in crude oil conjunction with Fed stimulus led risk appetite across broad commodities.
Added to the above, US soy meal exports slowed to 613 th short tons during Aug’12 from previous month exports of 653 th short tons, but much higher than last year same period exports of 473 th short tons. 

cotton seed oil


Such scenarios of robust demand for US soy meal amidst decent board margins might keep the Sep’12  bean crush to above 125 mil bu ( average monthly bean crush of 125 mil bu is required to meet the WASDE forecast of 1500 mil bu crush for 12/13 MY). Moreover, early harvesting of soybean also will support the anticipated higher crush. 
On the flipside, NOPA reported m-o-m drop in US Soy oil stocks for Aug’ 12 to 2.168 mil lbs (trade estimate was 2.244 mil lbs) from Jul’2 stocks of 2.345 mil ibs, which is mainly on the back of m-o-m drop in oil output. It is also lower than Aug’11 stockpiles of 2.306 mil lbs. Further, anticipated robust crush pace might replenish the stocks thus could keep the Soy oil fundamentals on subdued note at near term.
Market participants might take fresh demand cues from weekly bean inspections data which is likely to be near 18 mil bu, but lower than required average weekly inspection of beyond 21 mil bu shall raise the demand prospects and induce slight recovery in bean and meal prices; otherwise prices will remain under pressure. It is to be noted that US might have harvested around 10% of overall crop as last week weather was congenial for progressive harvesting across main regions. Further, upcoming crop condition report might reveal as 45% of crop under leaves dropping stage and 10% of area already harvested, report is due for Monday afternoon. Any surprises will impact the Tuesday trade. 
Looking at external markets, slew of measures by Fed viz. announced open ended QE3, extended operation twist till end of 2012, and delayed first rate hike till Mi-2015. The same along with ECB bond buying program might continue to boost the risk appetite among investor community thus limit the downside in CME Soy complex prices for a while.

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