links for 2007-10-02

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A Day of Waiting

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I think you could best describe today as a day of waiting for soybeans. It was a tight session of trading, with the high of $9.98 and a low of $9.90 and only closing up a 1/4 of a cent. There wasn’t much change from the information available last Friday. Over the weekend, the USDA announced that they wouldn’t be opening up any more acres which probably accounts for the slightly higher opening of $9.96 but there was no attempt to break the $10 mark nor much effort on the downside.

If everybody was waiting for some direction from the crop progress report, there wasn’t a lot of change there either. The harvest is well under way with 29% of it complete and there was a slight downgrading of the crop condition by 1%. That might provide a gust of wind tomorrow, but it feels like we’re back in the doldrums.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +0.63

Account Details

Account Balance: €271.48
Open Position P/L: €513.52
Account Position: €785.00
Overall P/L: -€1265.00
   

Seesaw, Margery Daw

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So much, for no surprises in the USDA’s grain stock report. Soybeans came in at a record 573 million bushels, well above estimates. Having read the report when it came out, I expected today to close well down. It did, all but reversing yesterday’s gains. Those extra 20 million bushels in the current stocks provide a little more leeway for next year’s inventories.Some analysts are indicating that today’s lower close was more to do with end-of-month profit-taking than anything else. That may well be true. The market made more leaps and bounds this week, so I would expect the usual profit taking to happen. In any case, I don’t see that the underlying fundamentals have changed. I note that China bought another 120,000 tons. Then again, Bloomberg is reporting that Palle Pedersen an “agronomist” at Iowa State is feeling very confident about this year’s crop for soybeans:

“The crop is going to be very good” and “Farmers are very happy with the yields they have been harvesting.”

This is part of my fascination with the markets, they are almost always so contradictory in nature. One day, they move up, the next they move down. (Unless it’s wheat it seems.) A simple idea such as the colour of grass is purple one day and pink the next, sometimes its even orange and blue at the same time. The bears and bulls sit on opposite sides of the seesaw, taunting each other:

Seesaw, Margery Daw,
Johnny shall have a new master.
He shall earn but a penny a day
Because he can’t work any faster.

Monday is a new week and I have no idea which way the market is going to go, except for wheat, it’ll probably go up.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long -17.62

Account Details

Account Balance: €271.48
Open Position P/L: €511.00
Account Position: €782.48
Overall P/L: -€1267.52
   

Break on Through to the Other Side

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Soybeans sailed right on through the $10 mark. The underlying fundamentals have been stacking up for a while now with increasing demand and falling supplies and since August have manifested themselves in a huge push upwards of the price. No doubt, the falling dollar and the continued march upwards of wheat have also been a major influence and today was no different.Wheat made a new record today at $9.3925. If the fundamentals are strong in soybeans, then they are doubly so for wheat at the moment. It is possible that what we have been seeing in wheat recently will be happening in soybeans next year. This all depends on how the planting goes in the coming months. If wheat continues upwards as it might do and reach its own $10 mark, then soybeans are going to be hit hard and won’t be able to recover the 5 million acres that it needs to.

The new record in wheat doesn’t evoke much regret anymore and I’m starting to think that perhaps I should get back in with a new long position. Then again Jim Rogers has already stated earlier this week, that he wouldn’t buy wheat at the moment; “I don’t like to jump on a moving bus.” I respect that man’s opinion. So I start thinking should I be entering a short position in wheat, before I finally come to my senses and remember that I do have a plan and any time I have strayed from that, the result has been serious damage to my account.

Back with soybeans, the USDA reported export sales at 745,600 metric tons, nudging close to the upper end of estimates. A new three year high was hit at $10.1775. Prices were last at this level in May 2004, when it hit a high of $10.64. Prices are still a bit away from that but the March and July ’08 contracts did reach $10.41 today.

Tomorrow is another Friday and there is another report due out from the USDA, this time on grain stocks, so there is some new info for the market to play with but the consensus appears to be that there will be no suprises. So I’m expecting the usual short-covering towards the end of the day tomorrow following this week’s continued action breaking upwards.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +18.63

Account Details

Account Balance: €271.48
Open Position P/L: €583.52
Account Position: €855.00
Overall P/L: -€1195.00
   

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
   

Unnoticeably Quiet

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I wasn’t keeping an eye on the market at all today. I just about caught the pre-opening reports but other than that I didn’t see much. All in all, I don’t appear to have missed anything. The news this morning was about Paraguay and the expected good harvest there. Soybeans opened a little higher and traded in a fairly tight range, before closing -0.25. There was some news about another sale to China, but really it was just a quiet Monday.

The USDA released the weekly Crop Progress report as they do after the market closed and it wasn’t all that surprising. 12% of the crop has been harvested which is slightly below the expectations I’ve been reading. The crop condition improved some more and this will be an interesting factor in tomorrow’s movements.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +0.13

Account Details

Account Balance: €271.48
Open Position P/L: €462.52
Account Position: €734.00
Overall P/L: -€1316.00
   

Soybeans Ease the Pain

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Corn seems to be grabbing the bigger headlines today, but for me soybeans continue to play up a storm. Now into it’s tenth successive positive close, soybeans continued to make fresh three year highs, reaching 996’4 early in the session. The USDA‘s weekly exports figure came in comfortably at the higher end of expectations at 513,600 metric tons. It was also reported over night that China will be lowering import duties to help combat hyper-inflation. This news was seen as more important for corn with China obviously needing more for food consumption than they are producing this year, but it was also seen as positive with China being the largest importer of soybeans. Both of these no doubt were the major bullish factors on today’s movements in soybeans.With the November 2007 contract within a whisker of $10 and the following three contracts already above the $10 mark, can this week end by breaking through this resistance point? I doubt it. It may reach the $10 during the session but with the usual closing of positions and weekend hedging, I’m expecting it to do no more than consolidate around or lower than today’s closing price.

Today however marks an important psychological milestone for me as my account finally reaches back over €750. This signifies the last of the lump sums that I deposited into my account several weeks ago. I was hugely over stretched at the time and followed it with more foolish behaviour that eventually with one mistake lost me a huge chunk of my capital. Since then, with my capital so low I was forced to cut right back on my positions and as a consequence missed out on the major movement in wheat recently. That lesson has been hard won, but I believe well learned at this stage. My open position profit also made it over €500, another nice number to reach. Of course, I realise that these are not concrete figures nor that they in fact mean much, but since so much of trading is psychological, it remains important to me. It also means that I have a new goal in mind and as such is a step forward.

I’ll leave you with an excerpt from a short article by Nico Isaac, introducing two publications (Monthly Futures Junctures and Daily Futures Junctures) that provide analysis on commodity markets.

Sorting Soybeans: The media reports are more “mixed” than a bag of beans: “US soybean harvest forecast to be smaller than last years.” — VERSUS — “Soybean acres could be on increase next year.” And, “Soybean harvest faces another threat: freeze damage.” — VERSUS — “There are no specific harvest concerns at this time.”

The September 18 Daily Futures Junctures has ONE clear message: “I believe this is a market to watch this week.”

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +18.38

Account Details

Account Balance: €271.48
Open Position P/L: €503.52
Account Position: €775.00
Overall P/L: -€1275.00
   

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