Support Stronger Than Expected

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Well, I guess I was a little right. Planting is providing the support, it’s just a lot more than I had anticipated at the moment. The factor’s haven’t changed, Brazil and wheat are still the major reasons behind the support. Dow Jones‘ outlook for the day had it summed up in their opening line:

Soybean futures on the Chicago Board of Trade are poised for a higher start to Wednesday’s day session, taking their cue from the overnight theme, as bullish underlying fundamentals absorb seasonal weakness

Add in China, with speculation that they will be increasing imports as their own output is expected to fall to an eight year low, and there was plenty of things for the bulls to run with. High of the day was 9.92, so the $10 mark is yet to be reached, but it didn’t close far off of the high at $9.90

There’s a lot more concern about the harvest today, even with the report earlier in the week that the crop condition was improved. Any ideas that the USDA’s prediction earlier in the month might have been too small is seemingly evaporating.

There’ll be more news tomorrow with the weekly export sales from the USDA out. Expectations are higher this week, between 500,000 and 800,000 metric tons. Friday will see the USDA report on current Grain Stocks. Having left the relative doldrums of the last few day’s little to no news, which way will the wind now blow?

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +17.13

Account Details

Account Balance: €271.48
Open Position P/L: €506.52
Account Position: €778.00
Overall P/L: -€1272.00
   

Harvesting Pressure, Planting Support

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I did catch some of the market action today and it seemed to me that wheat was pulling up corn and soybeans for most of the day. In the end though, with wheat giving up some of its earlier gains towards the end of the session, the short-term factors weighed heavily on soybeans with the harvest underway and yesterday’s USDA report indicating a better crop condition. The question now is, how much will the coming harvest impact on the bidding for next year’s crops. Northern Brazil still has weather that is too hot and dry for planting and will continue to be like that for the next couple of weeks according to the forecast. I note that soybeans today closed 3 1/4 from the low and 9 off the high. I think I can expect more days like today, with the price of wheat being the supportive factor.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long -5.87

Account Details

Account Balance: €271.48
Open Position P/L: €437.52
Account Position: €709.00
Overall P/L: -€1341.00
   

Expected Consolidation, Unexpectedly Postive

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Soybeans finished with another gain for a ninth session. I found that surprising, expecting a consolidation more on the negative side than on the positive side. All the more so with wheat finishing down 24.1 for the day, having earlier reached limit down. From the various and varied opinions of analysts, it appears that the support for soybeans is coming from underlying bullish fundamentals. In the shorter term, weather continues to be the major factor, with dry weather in Brazil delaying the planting of next years crop and the continuing idea that hot weather in August has damaged the current crop. This presumably is coming from bad reports from early harvesters. As one farmer from Illinois put it, “On August 1 I thought we had great potential, now it appears that we will have the worst bean crop in 20+ years.”I am always wary of reading too much into the crop comments at AgWeb, however it appears quite possible that the harvest will be as disappointing as the market currently believes it will be. More interesting to me though is the idea that if the harvest is bad, soybeans will still not be as tempting for farmers at their current price level. Soybeans will have to go much higher to make it interesting and worthwhile for farmers who will be thinking that next years crop could be just as low. This makes wheat and corn the safer bet in their eyes. This hadn’t occurred to me previously. This is one of the reasons why I read AgWeb most days. It gives me an insight on what the farmer’s viewpoint and I find that fascinating.

Tomorrow, the USDA will be releasing their weekly export sales. I personally believe it needs to be reasonably high within the expected range of 300,000 to 500,000 metric tons for the price to continue on its move upwards. Last week, it came in at the lower end at 346,500 metric tons. Then again, what do I know, the market will do what the market always does, it sets the price despite whatever I think. I find that reassuring in some ways.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +1.75

Account Details

Account Balance: €271.48
Open Position P/L: €431.00
Account Position: €702.48
Overall P/L: -€1347.52