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Soybean prices surge
Closing Soybeans Commentary
Fundamental Support: A great week
was seen with the May contract picking up 44 cents. Delays in the fledgling
Brazilian harvest, and problems with Argentine export approvals, were the prime
movers. Also this morning we learned that China purchased two cargoes of old
crop soybeans from the US. Having noted this good news we must balance it out
with some other facts.
South American Production: Yesterday
we released our estimates for next Thursday’s crop report. In our discussion
yesterday we indicated a rise in US ending stocks. Another issue to note is the
world side of the balance sheet, specifically South America.
Everyone agrees that USDA is too low on its Brazil estimate. Conditions have
been great in the past two months. That will be a little bearish. Previously,
Argentina appeared to be a minor issue. The Buenos Aires Grains Exchange, Oil
World, and Allendale looked for either no change or a slight decline in
production. The trade was surprised to see one US firm this morning suggest
Argentina could actually be increased by 2.5 million tonnes. This one stuck out
to the trade.
Update on China: As of last week
China had purchased 24.6 million tonnes (905.5 million bushels) of old crop
soybeans so far. Of this total, 3.9 million tonnes (142 million bushels) have
yet to be shipped out. Though we heard more talk that China may cancel some of
these bookings, we see no reason to expect any wholesale liquidation.
Direction: Short-term news and
momentum is bullish. We still suggest soybeans will be pulled up by corn.
However, once the South American problems are cleared up, corn is going to be
pulling up a heavy load.
(03/04) Bought May beans
1402, risk 1384, objective 1441 1/2. Closed 1414.
Closing Cattle Commentary
Live Cattle: Last night’s
discussion of long term supplies, exports, and prices brought quite a bit of
interest from clients. This morning, we were pleased to see information
affecting the largest portion of demand, the US consumer. Though it could be
argued the economy, and employment is not growing sharply, no one can say it is
Consumers made good gains in spending in November and have been at a closer to
normal rate since then. The chart here shows two lines. The bottom one is the
well known one reported by the media. The top line also includes those who have
given up looking for work but who would still like to. Both measures are
showing some improvement. That will also, and already is, translating into slow
growth in beef demand.
Direction: For the short term, as we noted last night, we have tight seasonal
supplies combined with raging exports and a rebounding US consumer. For the
short term, cash cattle typically lasts for another couple weeks. As we get
into April, and turn our focus to early summer supplies, we are looking for
those big fourth quarter placements to come tumbling down. Heavy supplies will
begin to be seen in May and last through the summer.
(01/26) Sold December 110 put 3.50, risk 3.75, objective 0. Closed 2.15.
(02/23) Bought June 114 put/sold 120 call/sold 106 put -.22 (22 cent credit),
risk to -2.22, objective +6.50. Closed +.72.
(03/01) Bought December/sold June 5.17, risk 3.17, objective 10.17. Closed