September soybeans advanced 43.25 cents while November increased 41.25 on total volume of 246,653 contracts. Total open interest increased only 1,343 contracts, which relative to volume is approximately 50% less than average. The September contract accounted for loss of 3,061 of open interest. Although the move on Friday was the largest since the beginning of the rally, the tepid increase of open interest indicates that market participants are leery about making commitments at higher prices. The market has advanced rapidly, and as this report is being compiled on August 26, September soybeans are trading 60 cents higher while November is + 59.00.
The Midwest crop tour projected that harvest would come in at 3.158 billion bushels versus the USDA of 3.255 billion. Additionally, the tour projected a yield of 41.8 bushels per acre versus the USDA 42.6 bpa. There has been a spate of very dry weather in the Midwest, and this looks to continue for the rest of the week. Soybeans are in a crucial growing period, and we warned clients to expect weather related rallies, especially since the short interest in the grain complex has been fairly substantial of late. Informa Economics projected a carry out of 101 mb versus the USDA at 125. Additionally they projected carry out for the 2013-2014 season at 195 bpa versus USDA 220 bpa. On August 19, OIA announced that November soybeans generated a short and intermediate term buy signal. Also, on August 19, September soybeans generated a short-term buy signal and an intermediate term buy signal on August 22. Weather markets are notoriously difficult to trade, and unless long from a significantly lower level, it makes no sense to chase the market higher, as it could reverse at any time. If the Informa projection is correct, a 25% reduction in carry out is a significant reduction and underscores the potential impact of very tight stocks.