Grain Spreads: Beans in the Teens

Sean Lusk General Commentary Leave a Comment

Commentary   

Beans closed deeper in the teens today on two fronts. I included a weekly continuous chart and we closed above last Augusts high. It appears they may test the ten percent higher for the year threshold at 1477 sooner than later in my opinion. The rally today comes on two fronts in my opinion.  First, there was noise and chatter from Brazil that farmers are refusing to sell new-crop supplies, leaving exporters short of supplies to fill contracts. This might prod  China to purchase more US soy that could extend our export window until Brazilian producers release their crops onto the market. In my view that prompted the second rumor. That rumor said that China was preparing to purchase between 1 – 2 million metric tonnes  of both corn and soybeans to potentially fulfill its commitments under the Phase 1 trade agreement. While recent rains have shown up in drought stricken areas of South America to alleviate crop stress, the forecast into February is uncertain in regards to moisture and in my view has funds and end users extending coverage near term, specifically old crop contracts. Ironically, China needs to purchase another 1.5 – 2 million metric tons of U.S. soybeans just to help this year’s demand reach USDA’s target. Could the reasons for this rally end up as a  buy the rumor and sell the fact event? Sure, but in looking at the charts, this looks to me more than rumor as a breakout looks to have occurred technically. Upside targets include 1477, then 1514.4, and then 15.88. Don’t rule out anything here in my opinion. This market turns south and the bean complex may turn over if we close under trendline support next week under 1354 in my opinion. Trade the charts and use caution.

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Sean Lusk

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