wmeubank@ocp.kcmo.com
(May 8, 1997) SOYBEANS: Soybean activity during the past week was strong early, but slight signs of topping action late week began to become apparent. Despite late weakness the market still seems worried about tight supplies. The latter has taken precedence over ideas that the upcoming U.S. soybean crop could be of record proportions. The most recent USDA Supply/Demand report did indicate that soybean stocks will be extremely tight as carryover was placed at 125 million bushels which was down from the previous figure of 140 million bushels. The one thing that would ease fears that stocks will not draw down to seriously tight levels is if demand eases, but the latter has not as of yet taken place as the latest report of weekly export sales showed an increase of 28% from the previous week. The latter scenario will continue as long as countries continue to build large enough supplies to ease fears that they will be able to supply needs. Overall, market internals remain mixed as old-crop supply and demand have kept the market firm, but when the latter issue does fizzle and tensions subside the market will come under pressure. The USDA prospective planting figure of 68.80 million acres was very large and if realized it will be the largest crop since 1980 which will more that likely ease supply fears as long as growing conditions are not out of the ordinary. The latter planting figure will more than likely come to fruition as prices seem to be high enough to spark heavy planting by farmers. Technically, July soybeans are in an uptrend; the trend would turn down on a close below $8.35.
FUTURES STRATEGY--Short SX at $7.20. Maintain a protective buy stop close only at $7.42<$E1/4>. Target is $6.70.
OPTIONS STRATEGY--Short SAN $10.50 call at $.11. Maintain a protective buy stop at $.26.
Tony Montini
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