Joe Victor is a Business Development Specialist with Minneapolis Grain Exchange, Inc., where he monitors cash grain activity and cash grain opportunities. He provides marketing advice through this blog.
May 06, 2009
Allendale Inc is well aware of the latest hot topics such as dwindling Argentina soybean production, China demand and the technical bull spreading of old crop futures (July & August) vs new crop (September? & November).
However rather than dwell on what the trade has been recycling for weeks, lets look for opportunity elsewhere within the soybean futures.
Allendale may have discovered an opportunity within the back month futures in the form of the January 2010 futures vs the November 2009 spread
. Allendale has researched the bear spread dating back to 2002 and discovered the heavy favorable odds for the spread to build greater carry within a very important time frame which must be followed. The time frame measured is from early month of May to early month of September.
We have discovered of the most recent seven years, the January futures gained on the November futures six times! Only in the 2002/03 spread did the spread lose 2 cents from when the spread was excited vs when it was initially entered and during the time the spread was working the amount of pressure reached a peak of 7.5 cents.
In six of the seven years the spread was activated in early May and excited in early September, the spread appreciated an average of 6 cents, with a range gain of +4 to +8 cents. In the six years when the bear spread worked the average amount of pressure during the May-Sept time frame has been 2 cents with a range of +1 to +3 cents. Allendale anticipates with average pace of planting and growing for the 2009 crop new crop stocks are projected to be 376 million bushels and likely have a need to build additional carry (futures market means to store the crop) into the January futures vs the November.
Allendale Inc recommends to buy the January 2010 soybean futures and sell the 2009 November futures as a spread immediately and hold until early Sept 2009.
What are your thoughts regarding this particular soybean spread? Are there additional reasons to support this spread idea or reasons why you would not active either fundamentally or technically. Is the risk to reward of interest?
The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Commodity trading may not be suitable for recipients of this publication. This is not a solicitation of the purchase or sale of any commodities. Those acting on this information are responsible for their own actions. Any republication, or other use of this information and thoughts expressed herein without the written permission of Allendale, Inc., is strictly prohibited. Allendale Inc. c2009