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GLOBAL ASSET MANAGEMENT
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(June 12, 1997) SOYBEANS: The soybean trade during the past week was fairly strong in the old crop and weak in the new crop. The old crop continues to be supported by tight supplies and decent demand and news that certain large U.S. grain companies will import Brazilian soybeans to help fill domestic does not seem to lighten the enthusiasm for more if an upside move. The USDA did add 5 million bushels to the old-crop carryover due to the imports from Brazil, but other then that the U.S. should be able to survive the tight scenario as long as current weather conditions do not change and the upcoming crop has a chance to develop. The export markers were fairly quiet as recent Far Eastern demand seems to have waned which helped keep weekly export sales on the low side of estimates.
Look for the market to fix its sights on the potential for a large upcoming crop in the U.S. and if summer weather is decent and there is no reason why the market cannot drift down. Overall, market internals are mixed, but turning weaker and as long as there are no more spurts in demand which rekindle worries of old-crop supply tightness the market should start to drift lower on the prospects of a very large U.S. crop. The latest soybean Planting Progress report showed 84% of the crop was planted versus a 70% 5-year average which ensures that planting will get done with no fanfare.
Technically, July soybeans are in a downtrend; the trend would turn up on a close above $8.59; SN now targets to $7.50 as long as the market maintains closes below $8.59.
FUTURES STRATEGY--Short SX at $7.20. Move protective buy stop close only down to $6.94-1/4.
OPTIONS STRATEGY--Short SO $8.75 call at $.10. Maintain a protective buy stop at $.23.
Tony Montini
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