Published on: 14:41PM Jul 09, 2008
We believe beans want to continue to rally, mainly on concern that planted double-crop acres could fall way short of expectation. We are hearing reports that many acres in the flood affected areas that were expected to be shifted to beans have given up. Second, beans don’t like wet feet and yields are being affected. The final concern is with all the wet conditions, it will be an excellent year for diseases (especially Asian rust which has not impacted the U.S. as dramatically as it was feared a couple of years ago).
The November beans contract bounced off above the uptrending support—which suggests that as long as the market can stay above the $14.80 to $15.05 level, the trend looks good for beans. If the market were to close below this level, expect massive long liquidation.
The three big outside market concerns now are:
- Will Congress do something drastic to take the speculative funds out of the commodity sector? I feel they are going to do something which could be short term negative but eventually the money will find a way around the limitations if there is money to be made in commodities verses equities.
- Which way will oil move—towards $200 or towards $100? My bias is higher near-term but not explosive unless we see a major terrorist event.
- How will the stock market continue domestically and internationally? Concern is growing the high fuel costs are finally going to start dragging down demand and very poor earning reports are right around the corner.
Summary: It appears that soybeans have some fundamental concerns that can keep prices higher. My biggest concern is the impact of outside market forces. This all suggests one should be cautious on exactly how much risk one accepts to the upside and downside right now. If your position is not quickly correct, don’t fight it and move to the sidelines.
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