Commentary: The soy has rallied approximately forty cents over the last month. This rally was sparked by Chinese purchases. The Chinese have increased the import agenda in soy in order to replenish stocks that were lower than normal. The Brazilian has been the dominant player to China over the last six months. It is presumed that the crop harvested last year was bigger than reported. The question going forward is if the Chinese will continue the purchases and for what duration. For the time being they are digesting what they have afloat and in port. The US still appears to have an opportunity for some purchases in the medium term. Looking forward this will be of importance as at present the export pace could be a bit overstated. The USDA will release a supply and demand report. This could show more bean availability. In addition, the current plantings domestically are moving along at a healthy clip. Overall the health looks very good. The market has a couple other considerations. The crush rate at present is very high. This will continue to potentially pressure the physical products. Both products have rallied of late. It is my thought that the long term presents challenges for product pricing . This could pressure crush margins. The deferred margins remain near $1.00. This price to me is high and presents opportunities to be crush (long beans and short products) with a quantifiable risk reward.
John J. Walsh
President, Walsh Trading, Inc.
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