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The soy traded both sides yesterday. Some thoughts. The Chinese bean stocks are up from a year earlier. Global soy coverage is very high given the crush margins. The meal demand in China is slowing, leading to a slow down in their internal crush rate. All this spells a long term change in business flows. In addition,the way China looks at protein may change as the availability of alternative supplies is on the rise from what I see. Having said all this. I do believe the bean short has some risk at present. I remain long term bearish, however there are various things that can spark a further rally. One would be a surprise settlement to the China scenario. It is my belief that this is not in Chinas best interest regardless of what the tv analysts say. I am sure there are negotiations going on behind the scenes. My opinion of course, and these will bring about results. For the long term bear that has profit. Buy short dated calls, August close to the money. If something changes, a rally could be quick and violent and you will be covered without giving up the position. A thought. India back on the scene. Oilseed crushing on pace for a record year. This will up the export availability potentially. Long story short, near term potential to rally, long term rallies are selling opportunities.
The Corn is starting to bottom. I remain friendly. The big question is how friendly. the yield will play a part to the answer. A reduction in yield below trend,(not there yet) could potentially become real friendly. The global numbers represent a demand driven scenario for the US for a 6-12 month period. That would be the best scenario to witness. A grinding higher trade based on continual demand. The NAFTA scenario is overhanging but quiet. It is again my posture that the Nafta will be seetled at least with Mexico. Both parties want closure. It is in Mexicos best interest. The corn potentially has a nice window. Hopefully this scenario can play out.
WHEREOF ONE CANNOT SPEAK, THEREOF ONE MUST BE SILENT LUDWIG WITTGENSTEIN
John J. Walsh
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