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It would appear that Meal is the Real Deal. I apologize as I just could not help myself with that one, but realistically it is the meal market that has been the driving force of this resurgence in beans. As the poor weather conditions in Argentina have been reducing the potential for the oncoming crops, farmers in the nation have become even tighter holders of existing inventories. Do note that Argentina accounts for around 46% of all the export trade in soymeal and if the beans are not making it to the crusher, it is challenging to meet exports demand. Consider the protein issues as well that we are confronting with beans/meal in this country as lower protein meal means that feed manufacturers must either increase the amount of meal in the ration or try to find a substitute, which theoretically would be boosting domestic demand. There has been a debate as to the discrepancies of the price of meal/versus corn but to this point at least, that has not been much of a limiting factor for meal. As I had pointed out earlier this week in our full commentary, the gap higher posted on Monday in meal appeared to be a breakaway/measuring gap and the action since would seem to leave no doubt that was the case. March futures quickly reached initial targets at the 365/368 zone and overnight just reached into the next group of objectives around 375. Since the low posted on the 12th of January, or 23 trading days, we have gained just over 20% and I would not be surprised to see us extend into the mid to upper 380 zone before we have exhausted. Of course, the moral of the story is, when everyone is thinking the same way and the news appear to be the bleakest, it does not require much of an upset to produce rather explosive moves in markets. Wheat and corn need to take heed.
I cannot but add another comment on the US Dollar as it’s performance has disappointed the bulls who jumped on board of the last couple weeks. While the index has not quite reached into lower lows for the year again, in spite of the belief that the Fed could become more aggressive in hiking interest rates this year, we have pushed back down to not only the recent lows but sit right above what has been the base uptrend line since the low major low posted back in 2011. If we see that now fail, it would open the door for at least another 3 to 4 points of losses and as I have commented many a time, that will not be a bad thing for the overall commodity markets. With trade war talk heating up more all the time, a weak dollar may be our only friend.
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