Soy Complex
Old crop/New crop bean and meal spreads continue to trade higher this week as managed funds continue to push both outright beans and meal higher. The catalyst for this rally has been the lack of rain in Central and Southern Argentina. Drought there goes back several weeks with many prominent crop scouts continuing to cut the soybean crop there. While soybean crops continue to impress in most parts of Brazil, continued rains in Mato Grosso and Goiás, their two biggest bean growing areas have delayed harvests due to consistent rains and as a consequence the planting of their secondary corn crop. Regarding Argentina, the longer the drought continues, the greater the worry. Therefore in the near term the path of least resistance remains higher in my view. With March option expiration Friday and first notice day and month end next week, we could still see some back and fill. We have seen the trade take profits into the last two weekends which has only resulted in a gap open higher on each Sunday night open due to forecasted rains missing their targets. Meal has led beans higher for most of this push the last few weeks. Last night beans and meal broke hard in the overnight trade but was met with buyers re emerging on the dip. Targets to the upside for May beans sit at 10.57. For May meal about 391.0 a short ton. Support for May beans at 10.29 and then 10.03. Meal support 378.8, and then 367.0. The question going forward is how high do we need to trade to price in the current weather worry? We will see if China is a willing buyer when they return from their New Years holiday next week.
July/Nov beans-has broken through our second resistance target at 26.4 trading near 30 this week before pulling back near 27 cents July beans over November. Upside targets sit at 33 over and then near 40 cents over. If it closes under 21 cents July over, look for a move down to 12.4 over.
July/Dec Meal-this spread has traded from parity to $20.00 a short ton July over Dec meal. Our secondary target from last week just missed at 20.5 over. We saw a little buying back in oil share today which resulted in soy oil gaining on soy meal today. While this spread (July/Dec meal) is ripe for retracement, a move higher is not out of the question. A settle under 14.0 over and we can pull back to the 50% retracement at 10.00 over.
I will cover wheat/corn on tomorrows report
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