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Bearish report has long tail

Fundamental Support: Beans fell to finish the week. It seemed we had follow through selling from yesterday’s USDA numbers. Beans have dropped 75 cents in the last 3 days but finished the week only 38 lower. This is the second consecutive lower week and could find support on a further setback. The dollar was strong due to S&P downgrading a few European countries. That was the main reason for the 70 cent rally today. South American weather will still be a concern next week as we get closer to the crucial time for the beans. There are some weather forecasts out there that have increased rain totals for Argentina and that helped the slide today as well. The funds were active again selling another 8,000 contracts. This is the 4th straight day of selling and the 7th day of selling out of the last 8. We are still looking at a further decline as a buying opportunity as we move into the 2nd half of the month. We are showing a chart tonight of crush numbers. NOPA crush will be out on Tuesday. The trade is expectations 141.5 million bushels for the month of December. That would be down 3% from last year. Problem here is USDA’s current 1.625 billion bushel hopes for crush have not been met once. We went from 12% lower in September to 7% lower in October and 5% lower in November. Now we are expecting 3% decline.

Exports and Crush: We hate to beat a dead horse here but USDA’s lowering of crush and export estimates yesterday may not have done the job…Rich Nelson

 

Trade Recommendation:

(01/13) Buy March Beans 1130, Risk 1095, Objective 1200

Russia’s favored import tariff levels for pork were set at 400,000 metric tonnes. That is down from 472,100 tonnes last year. Lower and lower imports should be expected for Russia in the coming years so this is not a market changing event. For supportive news Paul Georgy, company president and CEO, reminded us that a 50 cent drop in corn prices could encourage producers to slow up their aggressive marketing pace. That could lighten up this heavier than expected supply flow. In addition, perhaps next week’s snows will affect marketings...Rich Nelson

 

Trade Recommendation:

(01/12) Sell February 83 put 1.10 or better, risk to 1.80, objective 0.

Working Trade:

(12/21) Bought 1 Feb lean hog future and sold 1 Feb 87.00 call, risking 2.00 from entry, objective 3.50 from entry on the whole position. Futures bought at 83.50 and settled today at 85.60. Call sold for 1.20 and settled today at 1.02. Current position +2.27.

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Written by Rich Nelson 

Director of Research 

Allendale Inc. 

4506 Prime Parkway 

McHenry, IL 60050 

815-578-6161

Hypothetical performance results have many inherent limitations, some of which are described below.  No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.  One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.  In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.  For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results.  There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

 

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