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One direction for soybeans, up

Beans finished higher again today as this market has one direction in mind, up. August finished the day 23 3/4 higher at 1757 1/2 and for the week was 1.62 3/4 higher. The November contract was 34 higher at 1686 1/4 and 1.33 3/4 higher for the week. Weather is continuing to be the main theme right now as the European weather model is adding some rain to the Western Corn Belt but this rain will not be until next weekend and the trade feels this is too far out to put a lot of faith into. The demand side of the bean market is something we have not heard much about the past few weeks as we have continued to see good demand. We do not need to talk about a top in this market right now but here are a few things that could slow this market down and first is demand. Export sales were disappointing this week and earlier in the week there was talk that China was canceling cargos of US beans and even reselling those cargos to US crushers. Second, is weather and it is friendly right now. Until we see the weather change or the demand drastically drop off we are going to continue to see this market find good support.

Soybeans Take Control: The Western Corn Belt will bake with +100 degree temperatures for the next four days. As we turn our focus towards the end of July/early August, soybeans are taking the lead in the rally. With the new August forecast, we are looking for potential yield declines to 37 bpa and prices to hit 1750…Rich Nelson

 

Trade Recommendation:

(7/16) Buy November 1563, risk 1533, objective 1633.

The Cattle on Feed report came in almost exactly on expectations. Placements, the amount of new calves and feeders entering feedyards, were 1.8% lower than last year. That talk of big placements due to heat did not happen last month. It likely is going on right now though. Marketings, of finished cattle out of feedlots, was a full 6.1% smaller than last year. That sounds bearish but is not that bad. We had fewer cattle lined up to finish during that time. In addition the one less weekday in June 2012 vs. 2011 made the number artificially small by almost 4%. We were more interested in the Cattle report. Commonly known as Cattle Inventory, we get a full look at all cattle every two years. Of interest, the beef cow herd is -2.9% lower than last year. That beat expectations of -2.7%. Analysts were expecting the number of heifers held back to join the cow herd, heifer retention, to be 1.4% higher than last year. USDA’s survey said they were even with last year. We have a small cow herd and are now in expansion right now. This is bullish for the longer term (2 to 3 year) outlook. For the few cow/calf operators who have pasture or feed, these special cow sales going on now may be the place to find some good deals. For short term action in the beef market, we suspect cow slaughter will be picking up soon. That is pressuring wholesale beef. We will still hold from applying more of our moderately bullish trading positions…Rich Nelson

 

Working Trade:

(5/17) Sold Oct 120 put 2.25, risk to 4.00, objective 0. Closed 1.77.

(6/13) Sold Oct 118 put 1.50, risk to 3.00, objective 0. Closed 1.27.

(7/10) Sold Feb 126 put 2.62, risk to 4.00, objective 0. Closed 2.57.

 

 

Rich Nelson 

Director of Research 

Allendale Inc. 

4506 Prime Parkway 

McHenry, IL 60050 

815-578-6161

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.

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