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Lack of China demand hurts soy market

Soybeans: It was another very low volume trading day in beans today. This morning started with a day session reaction to the higher dollar and after that trade was dead calm for the rest of the day. Next week we get China back into the market. They have been tied up with the Lunar New Year holidays. That is not to say they will come back into the market causing an instant reaction but they can give us some demand news to trade from. For now, the market continues to wait on South America to put out harvest numbers in Argentina and southern Brazil. This waiting is evident by the fact beans did not follow outside markets or even find a short profit taking bounce at the end of the day.

With the dollar moving as much as it has, the lack of a move in beans shows that trading funds are still on the sidelines. We will have to keep playing the waiting game for better fundamental news. Trading in this market should still be kept short term. Market movement this week should be ignored as a guide for future movement. We want to caution those using the spike earlier in the week as a guide to thinking this market is due for another bounce. A spring bounce will be based on weather, fund buying and disappointing South American harvest numbers. None of these factors were traded this week and that is why we can't relate any movement this week to our future trading ideas. Keep an eye out for news that is deserving of moving the bean market. We want to stress that if beans start moving without sufficient news to justify it, it may be better to take any moves with a grain of salt for now. We are keeping watch for the news we can rely on for sound trades.

Direction: Allendale's downside targets have been met and we are neutral to slightly positive soybeans. Today's trade was lower on low volume once again. Next week does hold the chance for better volume but still likely to be choppy trade…Ryan Ettner

Working Trade(s):
· (01/26) Sold March 970 soybean call 12, option expired worthless 02/19 for +$600.
· (02/19) Bought May 950 3/4, risk 938, objective 975. Closed 954 1/2.

***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.

Advanced Charts Direction: Beans broke the current uptrend today, but managed to close back above it. The market found support at the 20 day moving average near 933. The close was near the highs, but we need to see follow-through next week…Monica Moehring

Vital Technical Indicator: The next projected major turn day for soybeans is February 24, soybean meal is February 23, and soybean oil is March 1.

Closing Cattle Commentary

Live Cattle: Chalk another week up for cattle feeders. Extreme price gains of $3 were seen plains with active sales of $92 and $92.50. The cattle market has been on a tear ever since the Department of Labor released that good employment report on the 5th. Also contributing to the bullish cause has been weather. The latest weight report shows these weather problems are taking 1.8% off weekly beef production totals.

Placements: Placements did fall as expected during January but not to the magnitude of expectations. The average trade guess was to see placements fall 4.9% compared with last year. Weather was poor. Instead, they only fell 1.8%. Part of that little of a decline may have been due to the good drop in corn prices from December to January. The average price on the March corn contract fell 17 cents between those two months. Cattle placed during January will come out of feedlots, and therefore affect prices, during the June through September timeframe.

Marketings: Despite the poor weather in January, USDA suggests feedlots marketed 2.1% more cattle than last January. That is a little better than the average trade guess of a 0.9% gain. That may be a part, albeit small part, of why packers have been a little e more eager to buy cattle than expected in the past three weeks.

Direction: The size of the recent cash cattle rally has been a surprise. The rally has not been. Typically the cash cattle market peaks in the second week of March. After that it is almost a straight fall into the yearly lows in early August. For direction, this market has hit our estimated high for spring earlier than we expected. This market is strong from a news standpoint (weather and employment) and also from the way it is trading (strong volume and open interest). That could imply the April could have chance to claw up to $94 before this is done. For trading, we will not stand in front of this market yet.

Adding Hedges: Allendale's current hedge program has 50% of cattle feeder's supplies covered at $92 on the April and at $88 for both the June and August contracts. We will put orders in for 25% more for those three contracts at $93.50, $91, and $90 respectively. Keep in mind the June and August contracts last year expired close to $82.50…Rich Nelson

Trade Recommendation(s):
· (02/19) Sell April 92.00 stop, risk 1.20 from entry, objective 89.50.
Working Trade(s):
· (01/29) Sold April 86 put/sell April 92 call 2.30, risk to 3.20, objective 0. Closed 2.77.

***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.

Advanced Charts Direction: Cattle also gapped higher today and closed fairly strong. The market is very overbought, so we will place a sell stop into the gap like with the feeders. Volume was also lower here today…Monica Moehring

Vital Technical Indicator: Next projected major turn day for live cattle is March 10 and for feeders is February 26.

Rich Nelson
Director of Research
Allendale, Inc
4506 Prime Parkway
McHenry, IL 60050
800-262-7538

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.

Soybeans: It was another very low volume trading day in beans today. This morning started with a day session reaction to the higher dollar and after that trade was dead calm for the rest of the day. Next week we get China back into the market. They have been tied up with the Lunar New Year holidays. That is not to say they will come back into the market causing an instant reaction but they can give us some demand news to trade from. For now, the market continues to wait on South America to put out harvest numbers in Argentina and southern Brazil. This waiting is evident by the fact beans did not follow outside markets or even find a short profit taking bounce at the end of the day.

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