Commentary
The meal market has been under pressure lately as the all interest in Soy has been in the Soybean or Soybean oil sector. The interest in those two contracts is valid given increased global demand against diminished supplies. Managed funds have taken notice. However, meal could be the sleeper here as we move into Spring. A reduced crop in Argentina could provide a spark for old crop meal to gain on new crop. Last months reported crush numbers were the second highest on record. Granted we have been crushing for the oil in my view not the meal. On top of that ASF continues to plague Chinese Hog populations which could create less meal demand in the months ahead in China. But in my view that would have more of a demand effect in the deferred contracts. That said, given the low carry-out for soybean ending stocks coupled with a short crop in Argentina, it may provide somewhat of squeeze here in the next 90-120 days. Regardless, I’m watching this spread (ZMN21-ZMZ21) July /Dec 21 Meal. Its nearing the 50 percent retracement from last Augusts low to this Januarys high at 33.7 July 21 over. Todays close was at 39.0 over. However in my view a close over 45.0 (trendline resistance) over and we could see the spread trade 15 handles higher to near 60, the next trendline resistance in my opinion. (See Chart)
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