Beans On Strong Run, But Meal More Impressive

February 14, 2014 12:23 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are trading 1 to 2 cents higher, soybeans are mostly 7 to 10 cents higher and wheat futures are 3 to 6 cents higher. Cattle and hog futures are slightly higher in electronic trade this morning.


* Old-crop soybeans break out. March soybean futures have pushed above the $13.40 area -- the top of the broad, sideways range that has contained prices since early last fall. A strong close today would confirm a breakout and point the contract toward the September high at $13.77 3/4. The strong rally in old-crop soybean futures the past two weeks has come in the face of persistent talk of Chinese cancellations of U.S. soybeans and confirmation earlier this week that China washed out 272,000 MT of U.S. bean buys. While Chinese cancellations are a foregone conclusion, traders are focused on the fact old-crop soybean supplies are tight and soybean bookings are stronger than the "required" pace -- even after USDA upped its export forecast Monday.

The long and short of it: Old-crop soybean futures are fundamentally supported by tight supplies and strong demand, but this "feels" like potentially the last run to the upside. I'd use the price strength to trim old-crop supplies to no more than "gambling stocks."

* Meal even more impressive. While soybeans are getting much of the attention, it's soybean meal that's the real price leader. Meal futures have pushed out to contract highs and are very strong technically. Fundamental support is coming from strong processor demand as they work to meet demand needs. With Argentine crushers running at about only 60% of capacity and questions about the state of Argentine exports moving forward amid the economic turmoil in the country, importers are turning to U.S. meal to fill their needs.

The long and short of it: Demand from soy crushers in addition to the export demand is creating a strong "pull" on soybeans and soybean meal, fueling the price surge.

* Markets closed Monday. Markets and government offices are closed for Presidents Day on Monday, Feb. 17. Grain and livestock markets will observe normal trading hours today. Grains will reopen at 7:00 p.m. CT on Monday, while livestock markets will resume trade at 9:05 a.m. CT on Tuesday, Feb. 18.


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