Let us take a look at the other side of the coin.
First, I would like to start by saying that the bean carry is very tight. This is what has fueled the recent historic run up in prices. I would like to remind that the market in beans is up over $25,000 per contract in the last twelve months approx. There are some issues that could change the bullish stance. The US has exported a large number of beans to China. The largest buyer in the world. The Chinese are sitting on an ample supply of beans at present. In addition, the weather in South America has improved and by most accounts the future looks brighter as well. It is my opinion that the current production estimates there can grow a bit. The February time frame will see a large expansion of harvest in the southern hemisphere. This will start to cut the US out of the arena. It is probable that this could be for some time. This is a hypothetical. What if China cancels some US purchases? Instead of a 140 million carry there exists a 250 million carry. Then the game has changed while beans are in the teens. There exists many predictions that the bean market is going to $16.00. It may. However, lets look at where we are relative to where we came from and lets attempt to be prudent. My suggestion. Don’t play for the long ball at present values. If long be protective with puts or stops. If, as a producer, you remain unsold reconsider that position. Lock in profit. Perhaps leave a quantifiable percentage for a further. This market has been big. It also has the potential to hurt a great number of people quickly. Quantify everything and have a strategy to lock up profit.
John J. Walsh
President, Walsh Trading, Inc.
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