ag thoughts

John WalshGeneral Commentary

The past two weeks has witnessed a unwinding of the rally in bean oil. The break has been dramatic and is approx 6 cents from the high. The oil share has broken from 36.8 % to approx 33.8% (h) on the close. Thats a reasonable move in a short period of time. It also reiterates the fact that the markets are in more of a revert to mean type of trade. (IMO) Looking forward bean oil and beans may be finding support into Feb. It is my thought that the Chinese will honor there agreement to the US. This commitment will however be at someones expense. The southern hemisphere will suffer under my scenario. Then what becomes of the soy and corn there. perhaps the tax structure is set up to crush more and sell the products. This could have significant impact on crush margins and meal. This of course remains to be seen. The start of Feb could bring a spree of buying as the Chinese exit there new year. This could offer a rally in beans meal and oil. This could allow the spreads in beans and meal to correct back to the upside as the carry in the market has widened of late. Quantify all positions, and have a risk reward

The corn is back and forth. the market in my opinion still has a chance of moving above $4.00 basis march futures. This could be driven by Chinese demand. At present US prices are competitive into april time period. This perhaps offers a temporary floor. Rallies in corn in my opinion are opportunities to make sales. Lets see what next week brings.