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Soybean price outlook remains bearish

Agriculture.com Staff 10/05/2009 @ 6:16am

Soybeans:  Last week, we listed many reasons for a potential sell off in beans to occur. There were a few more that should be mentioned.  

· Beans were called lower on a failure to break the down trend line Thursday.

· One US firm released their yield estimate for the report this week at 44.0 bu.

· Support of $9.02 was taken out and stops were run through.

· Above raised Brazil's soybean estimate, now at 63.4 mmt.

· Support of $8.92 was taken out and stops were run through.

· End of day selling came from those who had bought earlier in the day.

This was a high volume sell off which gives it more confidence than the recent low volume choppy trades we had seen recently. There does stand a chance for a bounce as beans approach the next and most important support level of 881 1/4. We are also looking at the possibility of a wet weather forecast that could give a small bounce early next week. Overall, the market showed us today that harvest pressure is on and expected to continue. One US analysis firm started the ball rolling lower with a good sized corn yield estimate and the market will likely not bounce too much next week. We look for a 43.1 yield on next Friday's USDA yield report. That is up from USDA's latest 42.3. As with corn the talk we are hearing from producers are that bean yields on a whole are at or above expectations. This of course does not to suggest that all yields look good but enough do to keep us bearish this market. We are trying to take a broader look at yields and not focus on what local beans look like. If we did we would have been buying all day. As an example, we have harvested 27 acres of beans so far on our farm, yield was 34 bushels. We need to look everywhere for price direction: Argentina, Brazil, national yields and much more. For this reason we will remain bearish to the beans as well.

Direction: There is a chance to see a small bounce due to rains next week slowing harvest. With the crop report at the end of the week looming over the market there is unlikely to be a large move higher. Things should stay sideways for the most part until we see the USDA yield.

Trade Idea(s): (09/21) Sold Nov 924, objective 885 filled 10/02 for +$1,560. Option Strategy(s): (06/09) Sold Nov 1240 call/sold Nov 800 put 62 1/4, risk to 19, objective 0. Closed 3 5/8. (06/16) Sold Nov 1220 call 45, risk to 11, objective 0. Closed 2. (09/24) Buy Mar 920 put, sell 1020 call, sell 800 put for 10 cents cost. There is margin required with this, but you are in a position to make 120/bu if the market breaks while leaving a 100/bu upside open before you are locked into a short.

***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.

Soybean Technical Commentary: Once beans failed to get past the 10 day MA, the market began its sell-off. The mid-September low at 892 was broken and the July lows were tested at 881 1/4. Monday's trade will be key to see if this support level can hold.

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