COMMENTARY:
BEANS – The beans were under heavy pressure today. There are a couple reasons for this. The overall market structure outside the AG sector is starting to show weakness. The concerns over the new variant, regardless of reality, are pause for concern. The Crude market as well as stocks also contribute to an overall weak feeling in the AG sector. The fundamentals are turning more and more bearish in my opinion. The South American weather is much improved, especially in Brazil. The private estimates are looking up. The bio mandate has recently been reduced from 13% to 10%, probably for a year. This is significant and will put more stocks on the ground in Brazil which will lead to further competition for the US. This, in my opinion, spells a minimum of 400 million carry domestically, and probably a 105 mmt global carry. This is ample any way you slice it. Watch the bean spreads in the deferred which still have an inverse.
MEAL – The meal was the strongest leg of the complex. This is more because the oil share is due a correction. The meal on a flat price probably has little upside. However we may be on the beginning of a long term shift back to meal dominating the oil. The meal will see pricing at weaker levels so a decline may be a grinding affair.
OIL – The bean oil was the weakest leg of the complex with somewhat of a route today. The global vegoil market is starting to be amply satisfied with stocks. In addition, the Brazilian reduction of bio has a negative impact with less bean oil being consumed. This will make more available for export as well which will weigh on US prices. We may be starting a bearish price reality in the veg oils. Watch the deferred oil spreads. The spreads, like the beans, are still inverted.
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BE WELL,
John J. Walsh
President, Walsh Trading, Inc.
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