It's a good time to sell soybeans, analyst says
With fund buying driving up soybean futures prices, farmers are urged to sell some new and future crop, according to John Roach, Roach Ag Marketing, Ltd.
On Friday, the bean market surprised everybody opening 20 cents higher stimulating heavy fund buying. Funds were counted as buying over 20,000 contracts of beans and nearly 8,000 contracts of meal and oil.
Funds were reported by the CFTC as being net short 39,846 contracts as of last Tuesday. Open interest on beans only dropped about 10,000 contracts Friday so half of the estimated "fund buying" may well have been month-end index buying.
The sharply higher trade initiated the first day of a Roach Ag sell signal on beans. "Do not ignore this is sell signal," Roach said in his daily market commentary on Monday. "Normally these sell signals last from 4 to 6 days and we like to make sales each day the sell signal is on."
Roach wrote about a customer named Steve from Illinois that asked the following, "I am way behind on selling beans as I came on late to your advice this year and did not get any sold before. Should I double or triple my bean sells to make up for this lack of selling?"
"Steve this sell signal has been a long time coming and I suspect that many farmers are behind in their bean sales," Roach said. The question is, "how many additional sell signals will we get during the next 4 months?" The speculative fever might get us one or possibly two more sell signals, but surpluses are really big and I would be aggressive with sales on this sell signal."
This rally in beans is not happening because of positive long-term fundamentals, Roach said. Ending stocks this fall will still be record large and it will take a much smaller crop than we are likely to get to reduce the carryover much for the fall of 2007.
Friday's speculative buying also spilled into the corn pit. Funds were counted buying an estimated 13,000 contracts even though the news on the new-crop plantings had traders talking about big yields. The CFTC reported that funds owned 207,186 contracts of corn as of Tuesday. If the pit counters are right, funds now own a record 224,000 contracts of corn.
"The speculative buying has given us some great marketing opportunities for future crop years," Roach said. "Long term marketing at our "historically significant prices" has been the biggest money maker of anything a farmer could do in grain marketing."
November beans for 2008 delivery closed at $6.52 Â½ on Friday. "Make sales on the first increment of six increments on your new crop beans for the 2008 crop year," Roach said.
December 2007 corn closed at $2.95 Â¼ and December corn 2008 closed at $2.99 Â¾. "Make sales on the second of six increments for both crop years." Roach said.
This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. Commodity trading involves risks, and you should fully understand those risks before trading.