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Soy futures prove to be volatile

Soybeans: Futures were volatile this week with a sell off Tuesday breaching support but buyers came in at 926 and markets recovered. Then on Thursday, beans open sharply higher and put in a high for the week at 952 on sympathy buying from a bullish USDA corn report. China also bought old crop US bean oil for the first time in years. They bought 40k on Wednesday and another 40k on Friday providing modest support – we expect that they have bought a total of 110. They also bought some new crop beans. However, USDA’s soybean numbers were bearish and rumors of China canceling 5 and delaying shipment of 7 cargoes of S American beans ultimately pressured values. Their port congestion is backing up beans and their crushing plants are rumored to be shutting down soon for maintenance due to poor margins (thus buying oil and canceling beans). Friday closed at 945 was +10 cents for the week. Funds were net sellers of about 3,000 this week according to floor sources.

Stocks: Since USDA confirmed that soybean ending stocks will be 'tight but adequate' for old crop at 185 million bushels (mb) while new crop supplies will increase by a huge 94% to 360 mb. This will set the market tone for the year. While we do not rule out a seasonal rally between June 28 and July 14, we think the bigger traders will be looking for that rally as an opportunity to sell as long term price objectives remain near or below 800. For the short term, we expect that as long as weather is good and the economy is in a struggle, beans will take out 930 support and put in the seasonal low we are all waiting for.

Next Week: Direction will likely come from weather and outside market influences. The weather outlook calls for a ridge in the eastern cornbelt on day 6-14 but then it moves out. Thus improving conditions for crops planted. Beans still need to be planted and drier weather is needed in an area between Missouri into south and southwest Illinois, then in southern Ohio. China continues to have a 'light drought' in Heilongjiang with scattered storms expected starting next week. This will be an area that needs to be monitored.

Direction: Since 930 has held so many times, we decided to raise our order to take profit on shorts and we were able to exit today. When we get a signal to buy, we might pursue the long side. Eventually we will view the seasonal rally as a selling opportunity as long term objectives are well below the market and offer a huge profit opportunity. Producers are 75% to 100% hedged and are now advised to call in and review strategy so are in position to take advantage of any seasonal move…Bill Biedermann

Working Trades:
· (04/15) Bought Nov 940 put, sold 1040 call, sell 800 put 18, risk at 5. Objective 100. Closed 40 1/8.
· (05/17) Sold July 944 1/2, objective 932 1/2 filled 06/11 for +$600.

***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 rallied into the close and finished above the 20 day MA. We will place another sell order at 9.55 near the highs of the trading range. It will take a close above 9.56 to get us bullish here again…Bob Dalton

Lean Hogs: We can say this cash hog market has bottomed about the right time frame we expected it to. Wholesale pork was up yesterday and we expect this afternoon’s report to show the same.

Pork Exports: This afternoon USDA's Economic Reserve Service finished converting recent pork trade statistics over to their format. The numbers for pork exports were not much of a change from recent. For the month of April they found exports were up 2% versus last year. That fits in with the previous three months of -2%, +6%, and 0% respectively. This is no surprise as China and Russia were key problems for us through April.

Pork Imports: April imports were -5% vs. last year. That fits in with the generally negative tone in the previous three months of -11%, +7%, and -3%. Through April this pork trade issue is a good, but not great story. Now that Russia and China have officially agreed to take US pork, we look forward to seeing future reports.

Chicken Exports Okay: When you consider the fact chicken exports were down 1% from last year in April and we did that without sending any product to our number one buyer, today’s report was pretty darn good. We are finding other markets for our product than Russia. This alleviates some of our concern for pork’s competitor.

Direction: Cash pork and hogs appear to have their early summer low in. It is now time to turn our attention northward. Our target for July and August is the $83/$84 area …Rich Nelson

Trade Recommendations:
· (06/11) Buy July 79.00 stop, risk 77.90, objective 82.00
Working Trades:
· (06/04) Sold August 80 put 2.75, risk to 3.97, objective 0. Closed 2.87.

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: Futures were volatile this week with a sell off Tuesday breaching support but buyers came in at 926 and markets recovered. Then on Thursday, beans open sharply higher and put in a high for the week at 952 on sympathy buying from a bullish USDA corn report. China also bought old crop US bean oil for the first time in years. They bought 40k on Wednesday and another 40k on Friday providing modest support – we expect that they have bought a total of 110. They also bought some new crop beans. However, USDA’s soybean numbers were bearish and rumors of China canceling 5 and delaying shipment of 7 cargoes of S American beans ultimately pressured values. Their port congestion is backing up beans and their crushing plants are rumored to be shutting down soon for maintenance due to poor margins (thus buying oil and canceling beans). Friday closed at 945 was +10 cents for the week. Funds were net sellers of about 3,000 this week according to floor sources.

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