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COMMODITY INSIGHT
152 Ennis Lake Road,
Ennis, Montana
(June 8, 1997) GRAINS: Over the past five trading days, July beans fell 45 cents a bushel while new-crop November actually rose 2 cents a bushel. In other words, the July-November bean spread lost 47 cents a bushel in a week. The past few days have been incredibly hard on the soybean bulls. It was extra hard on those holding bull soybean spreads.
Though bean prices have collapsed over the past week along with the bull spreads, there should still be fireworks left in old-crop beans simply because stocks remain historically tight. The bears on the other hand argue that old-crop beans will erode into July due to 1) a lack of export business 2) excess open interest in July bean futures and 3) the bullish psychology for old-crop beans has been damaged beyond repair. The bears could be right.
However, with stocks historically tight it will not take much demand to push old-crop values higher. And the heavy open interest in old-crop beans may not pose much of a problem if prices can stabilize. And the bullish psychology for old-crop beans will heal quickly if any weather problems surface now that the heart of the growing season has arrived. It would be a rare growing season indeed if some sort of weather scare failed to surface between now and late summer.
For the next five days, buy (2) December wheat at $3.58. And buy (2) July beans and sell (2) November beans at a spread of $1.31 cents or less to the July.
Jerry F. Welch
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Last updated on 06-14-97
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