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Soybeans Volatile, Hog Market Sinks

Updated: 04/07/2014 @ 1:12pm

The bean market ended a volatile week of trading on a quiet note, with liquidation of the bull spreads the dominating feature of the trade. 

The May/July spread narrowed 2 ¼ cents, and the July/Nov narrowed 4 ¾ cents. For the week, the front month May contract was up 3 ¾ cents.  Next week, the trade’s attention will turn to Wednesday’s WASDE report. Early thoughts are that the endings will continue to shrink due to phenomenal exports the U.S. continues to see.  

Soybean sales are now 105 million bushels for the USDA latest export estimate of 1.530 billion bushels. We still have five months of the marketing year remaining. We do look for the USDA to offset some of the export demand by increasing imports. With China desperate to get out of the buys, we look for U.S. end-users to buy these beans. Talk is somewhere near 14 cargoes are definitely coming to the U.S., and between 8 and 10 cargoes being offered. If they are bought at a deep enough discount, talk is they could be barged up river to be crushed.

Long-term, it looks like it will be hard to be bullish without a weather problem. China, the world's biggest buyer of beans, looks like it will be pretty much of out the market for a while. The world is currently swamped with beans. Argentina is just starting harvest and is trying to move beans at the same time their biggest buyer, China, is selling beans. The U.S. users continue to buy both beans and meal from SA origin, which should resolve our tight supply situation here. 

The recent strength in futures is due to banks blowing out short positions held by Chinese traders against their long cash positions. Their crush and poultry operations are already in serious red ink, and then add to the thought that futures were rallying every day and their cash values are declining every day – a very hard scenario financially. The fund position has actually gotten smaller as they have taken profit and are stepping aside while being replaced with small traders and hedgers blowing out of short positions. 

This is not going to end well when it is all said and done. Near-term buyers will be positioning for the next WASDE report, which is expected to be bullish, and that will probably keep a bid under the market…Jim McCormick 

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