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SA weather eyed

12/03/2011 @ 7:21am

Beans finished the week on a strong note. The funds bought another 5,000 contracts and were buyers four out of the five days this week. Beans were able to rally 29 ¼ cents this week. The weekly chart looks good but needs to take out 1174 ¼ next week to change the trend. Fundamental news will remain light next week as well but we will most likely start to see the trade shift its focus to South America. The recent dry weather pattern is building concern. If this continues, the bulls could lean on this and drive prices higher due to tight global supplies. We are showing a chart of the rainfall in the last three months. You will be able to see that the main growing areas of Argentina and Brazil are becoming a concern. Drew Lerner is President and founder of World Weather Inc. and is highly respected in the industry. He is not concerned about this yet but feels we need to keep an eye on this situation. He will also be at our conference again this year in January and has done a great job giving a seasonal overview for what to expect next year. With fundamental news as quiet as it has been South American weather could be the next big focus. It seems like the outside markets have settled down for now but look for them to give direction for Sunday nights trade.

Mixed News: The slight dry period last month in South America may be enough to help the trade stabilize prices for the short term. However, don’t expect a big bull rally yet. Bearish US fundamentals may be realized next week as USDA lowers demand on Friday’s report. Allendale looks for USDA to raise stocks from 190 million bushels up to 230.

Cash cattle traded $1 higher today at $124. Action has been sporadic this afternoon and final trades may not finish until later today. The two factors for this was the good news on employment and fears of Saturday's snows in portions of Plains. On the first front we cannot argue the good news. We don’t have to see rapid job growth to be bullish consumer beef demand. We will be happy to simply see time put between the recession. 

Keep in mind there is economic growth, not contraction, going on. It is simply slow growth. On the second case, while snows are a bullish issue, we do not want to jump the gun here. Feedlots will have much of Saturday and all day Sunday to clean things up assuming snows are manageable. Also, wholesale beef lost $4.52 and $3.58 this week for choice and select. We look for lower prices later this month...Rich Nelson


Working Trade:

(09/07) Sold 2 April 118 puts 2.57 each, risk to 3.00, objective 0. Closed 1.20.

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