Soybean futures see a lot of liquidation
After an ambitious rally to the $13.96 level basis the July soybean futures, liquidation was the mode of the day April 11. There are concerns about the G-7 meeting, during the weekend in Washington, that measures to control food inflation and str...
After an ambitious rally to the $13.96 level basis the July soybean futures, liquidation was the mode of the day April 11. There are concerns about the G-7 meeting, during the weekend in Washington, that measures to control food inflation and strengthen the dollar would be bearish; soybeans and corn also may have been a reason for liquidation. Word out of the Deutsche Bank AG, the world's largest currency trader, is that investors should purchase options on the euro ahead of these meetings in case such an action was to be put into motion by the G-7. The G-7 is made up of the U.S., Japan, Germany, U.K., France, Italy and Canada. I must give the soybean market credit.
While I may have indicated in past commentary that I looked for a high around April 11, soybeans on April 11 did not decline as quickly that day as the strength has been to the upside last week and even the previous week as well. As we start to trade the week beginning April 14, market behavior will be watched. While the Argentine farm groups have postponed their strike until May 1, the Argentine president has made little indication that she is coming up with a compromise or solution that would please the farm organizations. Forecasts for a warmer and drier week also was helpful in creating a pull-back in prices for soybeans and corn. I suspect that if it were the first of May and not much was done due to too wet weather, the markets would react quickly to the upside again for corn. The boat has been loaded to the long side for corn since before the U.S. Department of Agriculture's prospective planting report and the quarterly grain stocks report. Corn, per the July contract, came close to a target that I have had of 632 (628.75 was the high) and a 32.75-cent break occurred. Now, July corn still can rally up to 632 proper, and I suspect that the market has a tough time going.
We must note that corn needs to settle down as it is early in our planting and growing season, and corn prices have increased more than a dollar in just two weeks. Prices are moving too fast. I continue to hear of farmers switching soybean acres to corn, but, in some areas, farmers have locked in $13 or have the insurance to have a guarantee of $13 or more. So, we may not pull as switch bean acres into corn as some would think. Time will tell once the weather becomes more amiable toward planting. I hear Nebraska may not do a lot of switching. Still, with USDA surprising nearly all and the ending stocks being tighter still at 1.28 million bushels, there's an increasing importance for more planted corn acreage with a higher national average, say 162 bushels per acre ( or perhaps higher) to accommodate the demand. Or, stocks will get extremely tight. I suspect corn and wheat will fight for acres again next year. I look for corn to win that fight.
Talks between South Korea and the U.S. president continued on April 11 and will into this week. Hopefully, the two will strike an accord and the beef barrier will finally fall. Meanwhile, weekly beef exports reached a marketing year high. U.S. beef is cheap to world buyers and I can't believe that demand won't get better as we go through the summer.
Bothersome, on a technical side, is that my timing indicator is flat-lined at a very high level on monthly data, while the floater mechanism already has turned negative response on the August and October cattle. This has me miffed as fundamentals seem positive for the fourth quarter and yet, that is not what this indicator is forecasting (at least not for now). Could May and June be softer in price behavior? No doubt, the grilling season is off to a slow start. Not helpful either. It may be that the better time for cattle is actually February, April and June 2009.