Soybean Meal Continues to Support Soybeans
May 01, 2018
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The July soybean meal contract made new highs for the year after barely holding key support in the last week. A record pace of US soybean crushings had been weighing on the market, but issues in Argentina have pushed some near term export business back to the US. While the soybean meal rally is impressive, is it sustainable?
On April 25th a post-panama cargo ship flagged from Hong Kong collided with a port berth in the Port of San Lorenzo in Argentina causing some serious damage (there are videos online if you're interested). The General San Martin port complex in the Port of San Lorenzo is on the western shore of the lower Parana river and accounts for a significant amount of Argentina's soybean meal and corn exports. It is somewhat unclear how long it will take to repair the damage with some estimates suggesting 6 months to a year. The more immediate issue is the port blockage caused by the vessel.
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This has likely driven some additional export sales to US soybean meal. Last week soybean meal export sales were a healthy 223.7k metric tons, up 36% from the previous week. The question will be how much more business we could get in the weeks to come. Global end-users could already be nervous about Argentinean supplies after dry conditions have drastically reduced expectations for Argentina's soybean production.
However, the US (and likely Brazil) has responded with ramping up the domestic soybean crush. The USDA reported that a record 5.47 million tons of soybeans were crushed in March. This means that there will likely be more soybean meal available in the near term. The question will be how quickly Argentina can get back to business as usual and if they will have adequate soybean stocks to feed their crushing facilities.
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FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION.