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(March 21, 2002) SOYBEANS: Soybean futures encountered sharp selling this week, as traders are apprehensive about China's implementation of GMO product imports after March 20th. For the past couple of weeks they have been absent from the U.S. market and concerns are rising they will switch to South American origin. Inspections last week, were as expected at 18.0 million bushels but the dynamic pace of shipments is slowing down. Traders are convinced soybean acres will decline this spring. However, they may be in for a surprise since the farm bill will not likely be resolved in time for planting. This could result in the shift from soybeans to corn being far less than expected. The Commitments of Traders report indicates fireworks may develop as the funds have accumulated a huge long position of 130 million bushels, including options. This is the largest long position they have held in 2 years and may cause prices to "implode" as the commercials are adding to their short hedges. Also, adding to the problem is the small traders are long nearly 40 million bushels. Whenever a situation like this develops, it is generally wise to side with the commercials.

July futures topped late last week at 479.25, which was short of my target at 485. The technical indicators are overbought and it will take some time before they move to an oversold area. As it stands now, the market will likely head lower until mid-April unless 479.25 is exceeded. The best case scenario is for a decline to 448-440 with a bottom developing by April 3rd or 15th. If this occurs, then the odds are 50 percent we could match or exceed last week's high sometime in May. However, since 1997 the odds for a rally above the March high have been less. The worst case scenario is prices will fall to 415 and not bottom until at least the first week of May or June. Which scenario develops will largely be determined by the March 28th Planting Intentions report, and how well our exports hold up as South American supplies become available.


 
Dewey Strickler

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