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A bearish soy market seen for next week

Agriculture.com Staff 10/16/2009 @ 3:22pm

Soybeans:  We are finally coming up on the harvest window that many have been waiting for. Harvest talk is that combines will take out beans one way or another this weekend. Many are discussing drying the beans down even if they are harvested at 20%! This talk is not just limited to those who have received snow but producers from all over. If we can get the beans through the combine, they are going to go through no matter the moisture. We will come back Monday with what could be a surprising amount of beans harvested. Recent buying has not been met with much follow through and a close below yesterday's lows of 971 could be seen as quite bearish. While there is concern that corn harvest could be strung out, it is likely that bean harvest will move quite quickly. There is little doubt that fund selling in corn and wheat will also be felt in the beans although it will not be a commodity directly sold. Monday will see much more in the way of yield estimates, which we expect to be good, as well as harvest progress. New forecast, new yields and new harvest progress could not only cause basis to widen quickly but also prices to fall fast, much like the run higher.

Direction: A solid close below support on the charts will look very bearish especially when paired with either a better weather forecast or a recovery in the dollar. Yields are expected to exceed expectations. Even those that were once under snow are saying they are looking at some good yields.

Trade Idea(s): (10/13) Sell Nov 976 SCO (stop close only), risk 16 from entry, objective 39 from entry.

Option Strategy(s): (06/09) Sold Nov 1240 call/sold Nov 800 put 62 1/4, risk to 19, objective 0. Closed 1/4. (06/16) Sold Nov 1220 call 45, risk to 11, objective 0. Closed 1/8. (10/08) Bought Mar 920 put, sold 1020 call, sold 800 put for 10. Producer idea, there is margin required with this, but you are in a position to make 120/bu if the market breaks while leaving a 100/bu upside open before you are locked into a short.

***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

Soybean Technical Commentary: Just like corn, soybeans posted an Inside Day which closed slightly lower. We are using the 977 3/4 level as main support and so far have not seen a solid close below it.

Vital Technical Indicator: the next projected major turn day for soybeans is Monday, soybean meal is October 20, and soybean oil is October 28.

Closing Cattle Commentary

Larger Placements Will Continue: As expected, cattle feeders placed more cattle in September than last year, 4.7% more to be exact. This was just under the average trade guess of 5.5% more. This makes it three months in a row of higher placements. This action is seen primarily because we have more feeders that were run on grass this summer than last year. We must also point out you will continue to see higher placements reported on the next two COF reports as well. The 2008 fall placement pace was much smaller than the big 2007 levels. October 2008 placements were 10.5% smaller than previous year. November 2008 placements were 5.1% smaller than 2007. So, simply because we are comparing this year's numbers with a last year’s very slow pace, you should expect to see this continue.

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