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Wild week for soybeans

Soybean commentary

The soybean market ended the week on a positive note as we had a ‘dead cat bounce’ into the weekend. The market broke more than a dollar since hitting the weekly high Sunday night so it was oversold technically and due for a bounce. Bean market bears had a lot of money on the table going into the Christmas holiday so they no doubt were tempted to book these profits before the weekend. We did not see the soybean cancellations today that have been pressing the market lower all week. The massive fund liquidation that we have been seeing over the past week was also absent today. Unless we take out more technical levels of support, we believe that the fund liquidation might be over with, at least until we get through the holidays. The funds will be back in the market in a big way at the beginning of the new year as the index funds will be re-balancing their portfolios. For the week the March beans were down 62 1/4 cents but were of the weeks lows by 31 1/2 cents. The week’s trade definitely was a wild one, as we started the week at the $15.00 level which was Allendale’s high end of economic value and tested the $14.00 levels which was our low end of economic value. South American weather and money movement will be a big factor if beans can break out of the this  range. The grain markets will be closing at noon on Monday in observance of Christmas. They will open back up on Wednesday at the pit opening in 9:30.  Have a Merry Christmas.

Working Trades:

  • 11/13 Bought Mar 1400/1500 Bull call spread at 30.0 cents risk to 0 objective 65.0 cents settled at 41.
  • (The spread did hit the 65 cent objective yesterday but did not settle above it so we can not say we exited the trade)

Cattle commentary
This afternoon’s Cattle on Feed reported confirmed six months in a row of lower placements. The November decline, whcih was reported today, was 5.6 lower than last year (94.4%). the beef industry is set for year over year declines in beef production at least through the first half of next year. Prices will run at year over year increases at least through the first half as well. Having said this great long term news we will point out today’s numbers were a little negative compared with expectations. Placements were a little higher than the average guess of an 8.8% (91.2%) decline. They were right next to our estimate of 93.2%. Marketings, the number of finished cattle leaving feedlots in November, was 0.7% lower than last year. That could be a slight disappointment as the average guess was for a 0.2% increase (100.2%). It was almost an equal distance off our 98.2% estimate. For the big picture, total Cattle on Feed went from 97.4% on November 1 to now 94.7% on December 1. Also released today, the monthly Cold Storage report was a little disappionting. The 441 million lbs. of beef at the end of November was higher than the 428 the trade was expecting. A slightly negative Cattle on Feed report and a slightly negative Cold Storage report could give us a lower start on Monday. Cash cattle traded mostly $126 in Kansas and Texas and $127 for Nebraska (which generally trades higher). We are still concerned about December futures. With a normal basis it is implying $128 cash. If Kansas/Texas is the barometer of live based trading that would imply $2 higher next week. That seems a little over done. If given the chance for lower trade next week we will add to our bullish positions for the 2013 picture.

Trade Recommendation

  • (12/18) Buy April 134.80, risk 132.70, objective 139.40.

Working Trade

  • (11/30) Bought April 134.60, risk 133.20, objective 138.20. Closed 137.10. 
  • (12/05) Sold April 134 put 3.25, risk to 4.50, objective 0. Closed 1.65.
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