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China buys soy to fill reserves
Closing Soybeans Commentary
Fundamental Support: The soy complex finished the day higher but it was the first week since the beginning of February that the weekly charts were lower. Most of the support came from the bean oil. There is a lot of talk of China needing to buy more bean oil to fill oil reserves. That had big volume buying overnight of nearly 30,000 in the May and July contracts alone. That is roughly 5 times the amount we typically see. This wasn’t just bean oil but it was also palm oil and canola as well. Beans finished the week down about 8 cents but next week will be a big week. USDA will not only release acreage numbers but they will also release quarterly stock numbers as well. Our official numbers for bean acres are 74.495 million acres. That is a decrease of 0.481 million acres and could keep support under the market as we get closer to the end of March. Money flow will also be a big factor next week. Funds are long beans and have built positions over the last few months. The charts are still overbought and could be ready for a setback at any moment. The momentum is higher and the trend is up. Continue watching the 1330 area for support. If that is taken out we could see liquidation and a sharp pullback.
Acreage Update: Bloomberg’s survey of analysts found an average estimate of 75.429 million. This is a slight increase from their previous February survey of 75.309 and also from USDA’s AgForum estimate of 75.0. This expectation of “higher than last year” may keep the November contract limited in its upside moves next week…Rich Nelson
(2/23) Sell May 1329 on a stop, risk 1359, objective 1240 (gap fill).
(3/8) Bought April 1330 put 15, expired at 0 on 3/23 for -$750.
Lean Hogs Commentary
This week was certainly a rough one. This week’s Cold Storage report showed us February consumer demand was poor. That has carried over into March. Cash pork prices are down $5.22 for the month of March with the bulk of it coming off this week’s $3.03 lower trade. Though we did have bearish expectations for this time of year, with our 87.00 downside objective for the April contract, the market has exceeded that. Today’s low on the April was 84.35. With all of these issues this with us, can it get any worse? While the answer to that will always be a yes, prices are just getting low enough to encourage us to take flyer here and buy this market. Seasonally, there a few days left for this bearish move into April. Though the US consumer has shown a lot of resistance against meat in recent weeks we wonder how many more weeks of warm weekends will encourage them to change their minds. The other trade that has been discussed, those hog/cattle spreads, may look good at some point next week…Rich Nelson
(1/26) Sold 1 Apr 86 put/sold 1 Apr 95 call 2.75, risk to 2.40, objective 0. Closed 1.80.
(3/23) Bought May 93.25, risk 91.50, objective 98.20. Closed 93.77.