Global edible oil supplies are tight, Argentine soybean production remains uncertain, and U.S. supplies should remain tight ahead of this year’s harvest due to a robust export program over the past six months. Corn demand is rising rapidly as China restocks its reserve supplies, and risks are rising for the approaching growing season. The leader has been soybean oil. Interior bean oil basis at least 500 over, thus driving the market, and inverses, sharply higher. Those within the trade see no meaningful offers for Q3 or Q4 due to an anticipated very tight bean supply. It is important to note that Soyoil stocks are at five-year lows in China, due to increased feeding of soy oil to balance energy requirements in rations utilizing alternative feeds due to high corn prices, and due to recent slower crush totals. African Swine Fever re-emerging in China is most likely the cause of the weak crush numbers. One of the results so far has been old crop contracts in beans and oil are trading to a deeper inverse while old crop/new crop meal spreads continue to fall. I included a monthly bean oli chart. We took out the 2012 drought year high this AM trading to 58.25 before pulling back to a very old trendline near 57.00 basis May futures. Forty percent higher on year is at 59.36 and that could be the funds next target. Above that level is the April 2011 high at 60.41. Above that the highs made at the 67 handle in June of 2008 and the all time high made in March of that year could be upside targets. While extremely overbought, this market is exhibiting the very definition of a short squeeze in my view. Extreme caution is warranted here. Call or email me with a game plan for futures and options.
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