The soy complex, as discussed yesterday is in a bit of a tug o war. The meal has been the price leader for some time. This may be changing. The veg oil market in general has been on fire. This is driven by the palm oil stocks at multi year low’s. The oil share has risen from 30% to approx 33%. The current crush margins are approx 112-115. This will do a couple of things in my opinion. First the elevated margins will push the global crush pace especially in China. This will limit the need for meal imports, rather crush for the profit. In addition, the bean oil off take domestically is a record. This should continue. The current price of meal is showing some reason for demand decline. Not destruction. The veg oil prices potentially have more elastic demand. The current price structure should not hurt demand. The bean carry and demand are both friendly. The question is at what price is demand restricted. In addition, will all the purchases remain on the shipped side of the ledger. Watch the spreads as mentioned yesterday. The meal is struggling while the bean oil continues to make strides.
John J. Walsh
President, Walsh Trading, Inc.
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