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This week's revision report eyed

08/08/2011 @ 8:10am

The trade continues to look towards the August 11th report as a possible game changer with yield questions continuing to move the market. Beans have been true to its trading range as 14 proved as good resistance last week and we head back towards 13. The revised acres report that will be out with the supply/demand numbers Thursday which could also create a few surprises for the trade. 

Last week's fundamental support: The beans looked to the outside markets for general direction today. The early sell off in the stock market and the crude caused initial pressure on the beans but even with a rally back in the outside markets the weather and poor demand continued to keep pressure on the beans throughout the remainder of the session. 

Heating oil has been no stranger to the economic ripple from Europe and the slowdown in the US economy. A downtrend has been in place for the past 4 months in the heating oil. In addition to pressure from heating oil, soyoil is getting hit from its own fundamentals. Through June we have put 1.325 billion lbs of soyoil into biodiesel production. To meet USDA’s 2.300 billion goal, that leaves 975 million lbs left to use from July – September (325 million lbs each month). That is a bit optimistic considering the most recent month showing only 248 million lbs of usage! Bean oil demand is going to continue to suffer as long as biodiesel demand is under pressure. According to the AP wire funds sold 5,000 contracts of beans today.

Soyoil Woes: Cordon mentioned that 325 million lb. goal to meet USDA. The red area of this chart, soybean oil usage, shows we could not even hit that level during the high energy prices of 2008.

Working Trade:

  • (7/19) Bought September 1350 put 25, risk to 0, objective 40 cents. Closed 39 1/2.

Closing Cattle Commentary

Cash cattle actively traded at $113 today! That $4.50 gain beat out early week expectations for only a $1 to $2 increase. This should solve any questions about a low being placed for summer. Even more important, today’s move comes even in the face of all the economic jitters! Earlier this week we officially called an end to the second leg down in cash prices for the summer. If you are not long in some way it is time to get long…Rich Nelson

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