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 â€“ we expect that they have bought a total of 110. They also bought some new crop beans. However, USDAâ€™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 moveâ€¦Bill Biedermann
Working Trades: Â· (04/15) Bought Nov 940 put, sold 1040 call, sell 800 put 18, risk at 5. Objective 100. Closed 40 1/8. Â· (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.