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Pre-Opening Soy Complex Market Report

January soybeans were up 8 1/2 cents late in the overnight session after trading as much as 13 1/2 cents lower earlier. News of an easier monetary policy in China helped to spark a recovery in many agricultural markets. Futures in China closed down 0.2% on the session, following the China stock market lower, with the Shanghai Composite Index down 3.3%. Malaysian palm oil futures were down 1.4% overnight. While equity markets in Asia were mixed during overnight trading, stock indices in Europe were generally lower. However, the turn higher in the stock, metals and energy markets plus a sharp break in the US dollar are supportive. Easing monetary conditions in China and European optimism lent support as well. Euro zone finance ministers agreed on plans to leverage their emergency bailout fund, but they were not specific on the new expanded size for the fund. A major credit rating agency downgraded several of the largest US and European financial institutions by one level. Japanese Housing Starts during October were down 5.8% year-on-year, a smaller decline than expectations. Japanese Industrial Production during October was up 2.4%, higher than forecasts. German Retail Sales during October were up 0.7%, higher than expectations. German Unemployment during November was 6.9%, lower than projections. Euro zone Inflation during November was 3.0% year-on-year, in-line with estimates. Euro zone Unemployment during October was 10.3%, in-line with expectations. Major US economic numbers to be released this morning include a private survey of Private Employment at 7:15 AM, third quarter Productivity at 7:30 AM, a private survey of Consumer Confidence during November at 9:00 AM, a private survey of Chicago area manufacturing at 8:45 AM, a private survey of Pending Home Sales at 9:00 AM, and a private survey of mortgage applications released before the opening. For first notice day, Meal deliveries were 116 contracts and oil deliveries were 1,824. Deliveries were about as expected. Agriculture markets in general were under heavy selling pressure overnight, but after sharp losses in equity markets, Chinese officials cut bank reserve requirements by 50 basis points, and the easier monetary policy helped to lift many markets up off of overnight lows. Rumors of China buying 1-2 cargoes at the US gulf helped to support soybean basis levels and added to the positive tone yesterday. Argentina's Agriculture Ministry sees 2011/12 soybean production at 52-53 million tonnes, which would be the second largest on record. The USDA in November lowered their estimate of Argeintina's production from 53 to 52 million tonnes. A steep decline in palm oil production in Malaysia in November from October, ideas that sunseed oil excess supply from the Black Sea region may be about sold out, a smaller rapeseed crop in Europe this year and ideas that bio-diesel production in South America will expand again in 2012 are all factors which have supported recent increased interest in soybean oil. However, bearish outside market forces helped to pressure international oil prices, and fund traders saw a big push to short soybean oil in the US as open interest climbed over 37,000 contracts from November 15th to November 25th during a period when January soybean oil fell from 52.90 to 48.35. This suggests that fund traders added to their hefty net short position during this period. For the week ending November 22nd, Non-commercial traders were net short 20,512 contracts, an increase of 12,825 for the week. Non-commercial and nonreportable traders combined held a net short position of 27,247 contracts, up 18,160. Aggressive spec selling is a short-term negative force, but many traders view soybean oil as oversold. January soybeans closed slightly higher on the session yesterday but well off of the mid-session peak. A turn down and lower close for meal helped to spark the sharp sell-off off of the early highs and some choppy trade in outside markets after a robust start added to the late selling to pull the market well off of the highs. A lower US dollar and a jump in energy prices helped spark some increased buying in the soybean complex, early with January soybean oil jumping to a three-session high. Talk of lower palm oil production ahead has helped to narrow the palm oil discount to soyoil, and this is thought to be a factor to help support soybean oil demand and higher trade in energy also supported soybean oil. In addition, there is talk that the winter crops from Ukraine and winter oilseed crops from India are not fairing well due to poor weather, and this added to the positive tone. Talk that hot and mostly dry weather for the Indian rapeseed crop's sprouting period may dent production lent support. Talk of the oversold condition of the soybean complex basis the weekly COT report and optimism for the macro situation in Europe are also factors which might have helped to spark some short-covering.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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