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TIGER ON SPREADS
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(March 4, 2002) SOYBEANS: The soybean complex has also been suffering from a lack of interest but that should not extend too much longer. Seasonal factors favor a low by mid March. However, with the South American crop getting bigger on each estimate and few if any problems yet apparent for Northern hemisphere crops, there is little to generate any bullish enthusiasm kt this early date. Bean spreads have been in the doldrums as well. The old-crop July/new-crop November soybean spread has been wallowing between 4 and 6 cents November premium. A rally back to a July premium is likely in late spring, and now that the February break is over, some stability is expected. Hold the two units of the forward spread and be prepared to add a third unit soon. Crush spreads have stabilized at a good level--above 60 cents products premium--though well off the highs. One should not expect much further weakness but neither should one expect great strength in the period just ahead.

Soy oil spreads remain weak. This is reasonable in view of stocks in excess of 2 billion pounds. Don't look for further weakness but don't expect much strength either. Carrying charges (approximately 16 points/month) limit the risk in the oil spreads. Meal spreads displayed seasonal strength into January but then weakened as expected. Hold the long July/short March meal spread from near 400 March premium. The stop has been lowered to 200 March as the spread traded below 100 March this past week. One still should expect even money as the target. Longer term, watch the July/December meal spread for a forward spreading opportunity in the period just ahead. Stand aside in the oil/meal spreads for now.

 

Phil Tiger

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