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Joe Victor: More questions than answers

Soybeans: It is no secret that soybeans were the leader this week. The March contract closed up 21 cents. For comparison, March corn closed down 1 3/4 while wheat fell 11 cents.

Argentina Soybeans: The key impetus was a dry forecast for Argentina after its rains on Tuesday. No one knows what USDA do with South America on Tuesday's report. For Argentine production there is a wide range of estimates from 36 to 45.8 mmt. Last month USDA was 49.5 mmt. Traders still have the USDA Argentine attaché report fresh in their months. That report suggested a 42.5 mmt production. They fail to keep in mind 1) the attaché survey was done right in the heart of the drought. The recent rains may have stabilized things. 2) USDA will look at his report and likely move production in the same direction but it is unlikely they will adopt his large 7 mmt production drop in one month. That equates to 257 million bushels. If you figure US exports could potentially pick up around 30% of that change at around 77 million bushels. Making it clear, we do not think USDA will make that drastic of a change, both to Argentine production and to US export numbers.

Brazil Soybeans: While everyone is talking about Argentina soybeans there is a chance USDA will change their Brazil soybean estimates. Four of the five groups, out since USDA's January 12 report, have a lower production pegged. 57.1 to 59 mmt is the range. USDA on the 12th was 59 mmt.

Direction: There is nothing wrong with this week's moderate rally in soybeans. We have more questions than answers this week. However, we would advise against getting too excited on this market. You may remember the big rally from December lows was made on both South American weather AND Chinese buying. This week was a clear change in the China issue. They are not indicating they will switch over to South American supplies on schedule, instead of staying with the US as some had hoped. On the Price Outlooks section of the Allendale Research Center it suggests this market does have a chance at rallying going into planting on the old crop contracts. After planting is complete we will turn long term bearish. The downside target on the November is 750 at harvest.

Trade Idea(s):
(01/27) Sold 1 Mar 986, risk 1079, obj 920. Closed 1001.
Option Strategy(s):
(01/28) Bought 1 Nov 840 put, sell 1 Nov 720 put at 43, risk 20, obj 70. Closed 39 7/8.

Soybean Technical Commentary:
Beans closed above $10.00 for the first time since Jan. 27 today. This settlement was also above 50% retracement. A close above 62% might be enough to propel the beans towards the Jan highs near 1040.

Vital Technical Indicator: the next projected major turn day for soybeans is February 13, soybean meal February 23, and soybean oil is February 18.

Closing Hogs Commentary

Hogs: February hogs fell $2.20 this week. That was a valid break. With one packing plant closing this week, which we covered Tuesday morning, the spread between wholesale pork and cash hog prices will widen a little.

Fact vs. Fiction: One thing which we do not agree with is the big debate raging in the pork complex right now about demand. The trade has the perception that both domestic and export demand are getting decimated. We have no problem at all with getting bullish or bearish based on facts. Right now this market is making moves based on fears. If those fears were legitimate we should be breaking wholesale pork by $1 each day right? This week's pork cutout was down (drum roll please) 11 cents.

Direction: We remain solidly bullish for the move into summer. Deferred futures, except October and beyond, are under priced. We do not expect this market to start the big rally we expect until April or so.

Trade Idea(s):
(02/05) Stand aside.
(01/28) Bought Jun/sell Apr at 12.25, risking 1.50 from entry, obj 15.00. Closed 12.55.
Option Strategy(s):
(02/04) Bought 1 Jun 78.00 call/sold 1 May 68.00 put .30, risk to -1.20, obj 5.50. Closed -.15.

Lean Hog Technical Commentary:
Hogs held above yesterday's low today and filled the gap that was left. However, the market was not able to take out the downtrend, so we cannot rule out more weakness next week.

Vital Technical Indicator: Next projected major turn day for lean hogs is February 11.

Soybeans: It is no secret that soybeans were the leader this week. The March contract closed up 21 cents. For comparison, March corn closed down 1 3/4 while wheat fell 11 cents.

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