COMMENTARY:
SOY
The USDA report today was a surprise to the market. I suggested yesterday that there was a chance for a more bearish number. There is no way to predict the USDA numbers. The important thing in my opinion now is that this number has ramifications that could keep domestic numbers trending in a more bearish fashion. The USDA revision of last years crop added 80 million bu to the carry. This does a couple things in my opinion. First it opens the door to a yield increase for this year as well. The second it may open the door for a few more acres this year due to double crop. The end result is that given the fading demand at present. The US carry is trending towards 300 mil bu. If realized, the stocks to usage doubles. This changes pricing structure.
MEAL – The meal came under pressure with the beans under liquidation. That is a reaction that is to be expected. The meal in my opinion is not bullish but has fallen into a support area. The flat price can go a bit lower. It is important I believe to look at the global picture. As mentioned yesterday meal demand from China may pick up in the near term. It is my thought that oil share may have peaked.
BEAN OIL – The bean oil gained a bid early. Broke after the report. Then rallied back. It is my belief that the rally was more of a reaction to the meal weakness. It is my thought that the bean oil highs are in. Looking at the macro. The market wants to also focus on the crude strength. I’m not sure at this point that is relative. The South American blending rates have come down. The global veg oil picture is improving. All in All the market should start to become more supplied in the next 30 – 90 days. This could cap rallies and over time offer a more bearish out look. Patience is recommended.
MEATS
HOGS
The hogs and pigs report has put a bid under the market. The cash related strength is also important and suggests further gains are possible. The carcass cut out and the wholesale pricing are lending support to these thoughts. The technical picture has the moving averages in the near term pointing up. The hog market is currently brushing off further weakness in the cattle. It is my opinion hogs can continue to exhibit strength at present. As always quantify your risk.
BE WELL,
John J. Walsh
President, Walsh Trading, Inc.
800-993-5449
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