Bullish to corn
Think There is a Correlation? You would be right if you think there is a correlation between soybean oil and crude oil. Nearly as much as ethanol and corn were attached to crude oil a year ago, it is now soybean oil (there are no biodiesel futures) and soybeans attached to crude oil.
Uncanny how as crude oil futures have rallied and corrected, soybean oil has been very sensitive in its movement. Soybean oil futures have been and remain the leader to soybean futures. So goes the crude oil, so goes the soybean oil, so goes the soybeans. In fact it may be equally if not more important to keep your finger on the pulse of the crude oil in assisting your 2007 and 2008 soybean marketing as it is to keep another finger on the pulse of the 2007/08 South American (Brazil 62 MMT vs last years 59 MMT, Argentina 42 MMT vs 42.2 MMT, Paraguay 6.2 MMT vs 6.2 MMT and Uruguay 810 KMT vs 778 KMT) soybean development.
A few critical points to be aware of for Jan crude oil futures are the five cent chart gap between $88.05 and $88.10 left between 10/18/07 and 10/25/07. Consolidation support at the $86.50 level and if broken another chart gap between the 10/12/07 high of $83 and 10/15/07 low of $83.65. Jan crude oil closed at $91.86 on Friday as your reference point. Much of the recent rally has been at the hands of political unrest in Nigeria as well as Iran and Turkey. These fundamentals appear as though they may not be settled at a moments notice and could support the present up trend. Another event you may want to be aware of is a timing matter. Word has it the major fund managers cut off performance date to help set their 2007 bonuses is approximately Nov 15th. We anticipate as we draw closer to the 15th, funds may be prepared to set their exit points of their present long positions. This could easily influence how soybean oil and then soybeans react. If you have questions about the relationship between crude and soybean oil and how it may impact your trade positions and or cash and futures hedge marketing, contact your Allendale Representative at 800 551 4626.
Soybean Fundamentals: weather is shaping up for a good beginning for S America soybean plantings and early growth. Brazil is poised to produce a record crop and Argentina nearly unchanged from last years record crop. Soybeans remain influenced by the leader soybean oil which is finding its direction from crude oil futures. Soydiesel is the connector between crude oil and soybean oil. Soybean and soybean oil exports could use a boost. The threat of a mid winter La Nina episode within S America is real and bears monitoring.
The US Census Bureau: released its month of September soybean crush report on Thursday. Pre release estimates were anticipating a crush of 147.5 million bushels vs the August crush of 146.2 million bushels. Actual results came in at 147.50 million tonnes. These results are very much neutral. The Sept report is for the first month of the 2007/08 marketing year and compares to 142.4 million bushels for Sept of 2006/07. According to our special reports crush margin graphic within our web site, crushers maintain a steady profit per bushel and are halfway between break-even value and full capacity utilization. USDA has increased its crush demand 1% vs the 2006/07 marketing year. The Sept 2007/08 began with some noise as its level is a full 3.6% greater than year earlier levels. Allendale suggest USDA increase its crush usage by 20 million bushel to a target of 1.845 billion bushels.