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(March 7, 2002) SOYBEANS: Soybean futures rallied this week from fund buying and ideas the USDA will not raise the size of South America's crop in the Supply-Demand report. Currently USDA's estimates Brazil will produce 42.5 million tons of soybeans and Argentina 28.7 million tons. Prices also found support from news that Argentina will impose a 10 percent export tax on raw materials, which would benefit U.S. exports. Traders are keeping an eye on talks between the U.S. and China over the GMO issue. News is circulating they have softened their stance and will reduce the waiting period for safety certificates from 270 days to 30 days. This would allow soybean and meal exports to continue to China beyond March 20. However, Brazilian soybeans will soon be available for shipment and prices are approximately 35 cents cheaper than the U.S. Export inspections were below estimates at 13.2 MB and indicates interest may be switching to South American supplies. The Commitments of Traders report shows the funds have liquidated their short position whereas the commercials are still short and the small traders are holding onto their longs. This is not a bullish situation.

July soybeans were strong this week and are making a seasonal rally. Last week I mentioned prices are usually firm in March, but the pattern has not been consistent since 1997. Some of the momentum indicators have reached the stratosphere and it may not be long before the market tops. Keep in mind there is a huge crop in South America "lurking to be sold." As it stands now, unless we close below 454, there may still be enough momentum for a rally to 485-490. However, past history shows that when the market bottoms in January, as it did on the 2nd at 425, a top occurs 60 percent of the time by mid-March. A cycle high is due on March14 and means a peak could develop sometime late next week with March 26 probably the latest.


 
Dewey Strickler

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