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Fund investing ignites double digit soy price boost

Agriculture.com Staff 02/14/2016 @ 2:11am

Fund buying showed its strength in the soybean futures market on Friday, boosting prices to three week highs, on the Chicago Board of Trade .

On Friday, March soybeans finished 16 1/4 cents higher at $5.89 ¼. For the week, March soybeans are up 21 1/4 cents . Along with dry Argentine weather, the Funds are having a huge impact on prices this week, according to one analyst.

"Buying from both fund categories of index and spec has become the number one thing we look at on a day to day basis, over weather. We look at what their buying total is, short or long the market, and across all positions we cover, which is livestock, grains, and energy," Jason Ward, Northstar Commodity Investment Co. market analyst, said.

As of late, the spec funds such as companies like RJ O’Brien, and Man Financial and others, have been targeting the soybean futures complex to invest in, Ward said. "Without the fund buying in the soybean futures market, prices would be at least thirty cents lower than it is," Ward said.

Specs like the soybean market because of its movement of nearly $0.90 in the past six months , compared to a $0.15 movement with corn.

In the current situation on the soybean market, specs hold a short position by about 18,000 contracts, the largest amount they have been short since harvest, Ward said.

Before being short the market, the specs were 18,000 contracts long the market.

"So, that 36,000 contract swing going from a long to a short position moves the market. The specs are momentum traders and they like to use moving price averages," Ward said.

If the soybean price is below the 50-day historical moving average, spec funds will take a short position (sell contracts), and a long position (buy contracts) if the current price is above the moving average.

When asked what the spec funds next move might be in the soybean market, Ward said today might have been the start of it. But, even more spec buying would occur when the CBOT Mar soybean futures contract closes at $5.90 per bushel or higher.

"It's going to take more poor weather in South America, or some other news event before they would become long," Ward said.

Ward noted the first day of the month has been a higher day for the seven out of the last eight months, making him believe Friday's spec covering of short positions could be the start of a trend heading into February.

Meanwhile, Ward said the market is getting used to index fund buying toward the first day of every month.

Fund buying showed its strength in the soybean futures market on Friday, boosting prices to three week highs, on the Chicago Board of Trade .

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