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A Small Weekly Gain for Soybeans
The soybean market had a dead-cat bounce today.
For the week, the January beans gained ¼ cent while trading a 24¾¢ range. We would call today’s action rather limited, as the trade seems to be still digesting yesterday’s numbers.
The USDA numbers were not as bullish as the trade had hoped, as the yield was left unchanged and stocks were only lowered 5 million bushels. Technically, the markets’ move lower did a bit of damage yesterday, as the longterm uptrend line was taken out. The January beans are still above the 200-day moving average of 9.80½, 100-day moving average of 9.79½, and 50-day moving average of 9.82¼. This provided support to the market. If these areas of support are taken out, 9.69½ and 9.63¼ will be the next levels of support. These moving average levels are critical. If they’re taken out, it could encourage fund liquidation.
Our economic models suggest that the current value for beans is $9.70, based on the current stocks-to-use ratio. We would recommend producers sell the carry anytime beans are over $10.00 and use options as a lower risk way to maintain some skin in the game if South America has a production problem. There is a bullish seasonal July soybean trade that comes into play next week; call the office for details.
Allendale would like to thank all the armed forces veterans for their service.
Happy Veterans Day.
The gap on the December contract, down to 121.62, was filled today. For gap theory, we pay attention to both the gap getting filled and what the market does after that point. The response after that technical target was filled, further declines, is not positive from a chart perspective.
Today’s cash cattle sales at $120 in the North were the driver for losses on futures. Though most sales this week were done at $124, this is not the way you want the week to end.
The Friday afternoon report, Estimated Slaughter, showed that packers told USDA they intend to process 623,000 head this week. That would be under our morning estimate of 630,000 head. Another weak Friday kill, this time at 112,000 head, and a 47,000 Saturday kill were noted. This would be only 1.4% over last year. Kills over the past six weeks have averaged 3.6% over last year. Given the lower weights, USDA estimated the week’s beef production would run 0.6% under last year. We wonder if this will turn out like the week ended October 28. That kill week was revised up from 617,000 to 625,000. If you believe this week’s estimate, it would be on the lower end of the fall kill schedule (623,500 - 647,700).
Our current price target is $124 the April.
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