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(June 12, 1997) SOYBEANS: OUTLOOK--What a couple of weeks for soybean traders! At the start of this month, in the overnight market, July soybeans traded in the 890s. Cargill became a big seller early in the week, then made an announcement they would be importing Brazilian beans. This has never happened to any major extent; the world's largest exporter has never had to import.
Cargill generally does not announce their intentions. The real reason they are importing soybeans is that they cannot find adequate supplies in the southeast to supply the crushing plants.
In any case, the market panicked on the news and fell about 60 cents. On the break Cargill was a noted buyer. They played this one well. I'm hearing the quantities imported will be small and offset by largely domestic usage. Lower prices will only stimulate demand and make a tight situation tighter. Corn fell last year into option expiration [despite tight supplies] then mounted the biggest rally of it's history from mid June to mid July. Look for soybeans to do the same thing this year!
STRATEGY--HEDGERS: After accepting net profits of $1.10 in March and May bean calls purchased as a replacement for cash bean sales, we still own the July 850s for 25-45 cents. Roll these at the market to the August 800 calls as we wish to maintain ownership. We also remain 50% sold in new-crop November futures at an average price of about $7.02. No additional hedges are recommended at this time.
TRADERS: Gamblers, look to buy the next close over $8.30 July (indicating the trend has turned up again). Risk to $8.00 for an eventual move to new contract highs.
George Kleinman
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