The USDA report on Friday will be important. The acceptance of a very large domestic and global carry may come to the forefront. The market participants are looking high and low for a bull story in beans. The weather in SA may be dry. Well, some areas, the reality is the private analysts are 2-6 million tons larger in Brazil than the USDA has plugged in. The Chinese demand is another bull reason. True the demand is at or near record. We have grown global soybean stocks in 4 years from 60 mmt to 100 mmt. Unprecedented. What would we do without record demand. The numbers don’t lie and eventually matter to the market. I am hoping for a bounce into the report to use as a hedging opportunity.
Looking at a couple relationships that could win out. 1) the oil share. The soybean oil may be entering a growth phase for demand due to various reasons. The biofuel could drive a relationship rally. 2) The corn vs beans. Given the global scenario and the potential for bean acres to invert corn acres next year. Corn may well have a opportunity to gain on beans. The current short in corn is close to record amounts. This could spark a rally.
These ideas are exactly that. As always it is important to quantify the risk in a trade and have a stop point.
Happy New Year