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Soybean market eyes Argentina
Closing Soybeans Commentary
Fundamental Support: Beans closed higher 9 out of the last 10 sessions. For the week, May beans were up 13 cents and closed strong once again. Volume was light today with the March options expiring. We typically see more volatility as contracts expire but we definitely didn’t see it today. Exports were supportive with USDA announcing big sales of 4.032 million tonnes for the week. The trade was looking for 2.0 million to 3.5 million tonnes. China’s purchase agreement helped out but beans are still cheaper here in the US than South America. This may keep exports strong until we see that relationship change. We usually see a shift in exports to South America as there harvest gets under way. Crude oil continued higher and continues to take bean oil with it. A situation that is brewing and could be friendly beans is a potential strike in Argentina. Argentine grain truck owners are talking about striking in March. They are demanding higher transport rates and a protest will disrupt hauling during the early part of corn and bean harvest. This situation could keep the funds active on the long side as this story builds. We are also showing a chart today of some aggressive changes to USDA’s balance sheet. . Due to South American crop problems they now see US exports rising to 1.550 billion bushels. That is offsetting the increase in supplies. This could support beans for the next several weeks due to friendly charts and the continuation of friendly news.
Falling Ending Stocks: It was surprising to see USDA act proactively and start plugging in South American crop problems into the new crop US export numbers…Rich Nelson
(2/23) Sell May Beans 1295, risk 1320, objective 1225.
(2/15) Bought March 1250 put 10, expired at 0 on 2/24 for -$500.
Closing Cattle Commentary
This afternoon’s monthly Cattle on Feed report was slightly supportive. USDA’s survey of feedlots indicated Marketings (finished cattle leaving feedlots) were 2.4% larger than last year in January. That was better than the 0.3% estimate. Placements of new calves and feeders into feedlots were 2.2% smaller than last year. This was just under the 1.2% decline that was expected. More cattle leaving feedlots and fewer cattle going in means the feedlot population declined from 3.0% larger than last year on January 1 to 2.1% larger on February 1. The other variable for today, cash cattle, is still undecided. We would now expect cash cattle to trade at $1 higher than last week. Not only was the COF data slightly supportive but wholesale beef advanced $7 this week. Tonight’s chart may help illustrate the seasonal issue for cattle prices at this time of year. It is rare for cash cattle to make the spring peak during February. The average peak comes on March 21. Based on seasonals, the COF information, and warm weather we cannot call a top here. There is a chance the April futures can hit $132 before falling to our projected $129 at expiration…Rich Nelson
(9/07) Sold 2 April 118 puts 2.57 each, risk to 1.00, objective 0. Closed 0.17.
(11/23) Sold 1 April 122 put 2.67, risk to 1.30, objective 0. Closed 0.42.
(1/24) Sold 1 August 122 put 2.15, risk to 3.50, objective 0. Closed 1.67.
(1/24) Sold 1 April 124 put and 1 April 133 call 2.77, risk to 3.90, objective 0. Closed 1.65.
(2/1) Sold 1 October 128 put 3.42, risk to 4.90, objective 0. Closed 2.92.
(2/1) Bought 1 October future and sold 1 October 136 call. On entire position risking 3.50 from entry, objective 7.00 from entry. Futures bought at 132.27 and closed today at 134.15. Call sold at 3.70 and closed today at 4.45. Net position +$1.12.
(2/13) Bought October/sold June 5.50, risk to 3.85, objective 8.00. Closed 6.40.