Published on: 16:32PM Apr 21, 2010
Both commercials and large funds are long beans. Last week saw the total open interest increase, not what happens when rallies are based on short covering. What that means is, unless we are looking at commercials who are engaged entirely in a crush trade, this is not the time to sell any part of your crop. Commercials are short meal and they got a little shorter last week, so some of the action is, indeed, crush related. Open interest increased in meal, again implying the rally was not based on short covering. Finally, commercials are short bean oil, again suggesting that much of their positions are based on crush spreads. Open interest decreased a bit, which doesn’t tell us much. Bean oil continues to perform like a cube of jello; push on it, it goes nowhere, just jiggles a little. While it is hard to imagine beans having a good rally, as I rather think they will, without a rally in oil, I can’t see buying oil as a speculative instrument when better performing meal and beans are available. The charts are saying what most of you know – it is too early to hedge your soy crop, too early by at least a couple of months, more likely by four, maybe more.
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