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Reward the soybean market

Agriculture.com Staff 02/12/2016 @ 8:07am

Soybean Fundamentals: Six to ten day precip maps do not hold out much promise for key soybean production areas of Brazil which need it the most. Argentine President plans to increase the export tax on grains in an effort to raise funds for its government. Exports are big business for the S American country and its farmers are not pleased with the tax announcement, as exports are their life blood, their incentive to expand operations.

If you are in need of cash flow Allendale would advise you to take hold of the opportunity presented by higher futures, higher Midwest basis and technical resistance displayed by the daily charts and move soybeans to the cash market before you think about selling corn. The spreads favor storing corn over beans if the decision needs to be made.

Soybean Special Report: the trade suggest the soybean oil is easily persuaded by the trade activity in crude oil. If this is true we need to try to identify, to what degree. Ultimately if crude oil jumps by $1 or $5 what is the price relationship to soybeans? Soybeans market holds its potential in the hands of world crude oil trade. We identified the correlation between soybeans and soybean oil, and crude oil to heating oil trade activity has a high degree of correlation of at least 85%. The correlation between crude oil and soybean oil is better than 50% but not as high as crude to heating oil or as high as soybeans to soybean oil. The exact correlation between crude oil and soybean oil is 63% and drops to 57% crude oil to soybeans. In clear terms if crude oil finishes on a positive note. 63% of the time soybean oil will finish higher.

Crude Oil and Soybean Oil: as explained there is a 63% correlation between crude oil and soybean oil. Allendale's research suggest if crude oil drops a dollar the net effect is a 51 point drop in soybean oil. If crude oil drops $2/barrel then the net effect on soybean oil futures is a 102 point drop and a $5 drop in crude is equivalent to a 256 point drop in soybean oil. Crude oil closed at $93.49/barrel and soybean oil futures closed at 42.07 cents per pound. If crude oil were to drop $5/barrel on Friday, there is a 63% chance soybean oil futures will follow the same direction and could close at 39.51 cents per pound.

Crude Oil and Soybeans: there is a 57% correlation between crude oils direction and soybeans. Allendale's economic research suggest if crude oil closes by $1 in one day, soybeans correct nearly 16 cents lower, if the crude oil correction is $5 per barrel then there is a 79.62 cent per bushel correction. It is extremely important to understand the correlation is less divergent between soybean oil and crude vs that of crude and soybeans.

Conclusion: we understand there is an attachment between crude oil and soybean oil. It may be important to make sure when discussing you old or new crop soybean marketing plan, you and your Allendale Representative are also aware of the technical make of crude oil, support, resistance, Moving Averages, oversold or overbought. Crude oil has the odds to be the precursor to the success or failure of your soybeans.

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