Grain Spreads: Supply and Demand

Sean Lusk General Commentary

Commentary

The bean market was buoyed by strong demand data and another drop in crop condition ratings from USDA. This may have countered Pro Farmer data which predicted yield at 51.2 BPA versus 50 by the USDA the week prior. Uncertainty reigns in my view which in my view could cap near term selling. Outside markets aided as well. News of another soybean sale to China, along with strength spilling over from resurgent crude oil futures sent the soy complex higher in my view. USDA announcement China had bought 132,000 metric tons of soybeans contributed to buying interest. Bulls were probably heartened by Monday’s 1% dip in the U.S. soybean crop’s “good” to “excellent” rating to 56%, particularly with some private analysts saying last week’s rains came too late to substantially boost fall harvest yields. The bullish kicker in my opinion came from the commodity sector leader crude oil, since its second straight bullish surge spilled over into soybean oil values. Nearby crude added almost $2 per barrel today after jumping about $3.50 yesterday. It is my belief that, bulls had to be encouraged by the underlying idea that last week’s late breakdown prompted a quick, aggressive return of Chinese buyers to the U.S. export market. I included a soy meal chart. Gap at 383 on the December futures chart. Prices held near term support at 3.48. We have key resistance levels to get through to turn bullish, but the gap seen on the chart maybe a near term target should the path of least resistance become higher in the soy sector. 

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Sean Lusk

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