wmeubank@ocp.kcmo.com
R.J. O'BRIEN & ASSOCIATES, INC.
555 W. Jackson Blvd., Chicago, Illinois, 60601
(November 13, 1997) SOYBEANS: CAN WE JUSTIFY $7.50+ JANUARY BEANS?–Part of us says yes and part of us no. The reason is this: While we've been demand bulls since July, and demand has held up remarkably well considering the price increases, the USDA report gave us some pause. It was bullish. But not maybe as bullish to support, say a move to $8.00. As expected the crush and exports were raised but with the 14 mln. bu. increase in production, carryover dropped only 15 mln. bu. to the 255 mln. bu. mark. And the violent movement of Monday and Tuesday loosened some of the confidence of the bulls. Then there's talk of China possibly selling us some beans back (no surprise even if it's true). Maybe they'll use the profits to buy back that corn everyone says they need. And of South America, we wonder if Brazil will become another Australia as per the El Nino effect. As of this writing, plantings in Brazil are in line with the average and forecasts are for the wet areas to dry and dry areas to get precipitation. And then there's the funds. We believe they continue to exit the long side of the corn and now the wheat and filtering that money back into the bean complex. Once again they are long the “triad,” as we say. What it boils down to is this: The relatively easy money upside may be over. It may be time to sit back and reassess the situation. We have turned from adamant demand bulls to neutral, maybe even a bit negative towards the $7.50 level.
John W. Kleist
Commodity Consultant
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