COMMODITY REVIEW AND OUTLOOK

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(November 21, 1997) SOYBEANS: SHORT TERM–Good exports and ideas that rain in Brazil slowed planting supported the beans after the recent break. However, growing weather in Brazil is excellent, by and large, so rallies may have trouble holding. Many traders are still wary of the Asian economic problems. With a huge crop going in the ground in Brazil with no problems of note, a huge crop harvested here, weakness in most Asian economies, and no sign of El Nino, it may be difficult for beans to hold gains. If currency weakness continues to be part of the scenario, Asian nations with currency problems may turn to South American producers that are also having currency problems instead of U.S. producers. This is not a bullish story. However, choppy markets may very well be part of the landscape for the near term, with good demand vying for dominance with what may end up as burdensome supplies.

The concern is that demand will fall. Many traders are already extremely sensitive to that point of view. This makes the buyers less aggressive. Good planting weather is encouraging aggressive selling of beans by the funds. El Nino remains a back-drop bullish factor, as yet to be realized.

RESISTANCE–Resistance basis Jan. remains near 711, 715, 724, 726-728, 733, 737, 741-742, 748.

SUPPORT–Support basis Jan. beans remains near 705, 700, 690-695, 675.

RECOMMENDATION–Until such time as beans can score highs and hold them, I would be skeptical of their ability to trend higher. The chart is somewhat negative. If Jan. beans take out the 700 level, the sellers may become more aggressive. Aggressive short-term traders might sell Jan beans on rallies into the mid teens with stops of 5-10 cents or over 723 or 731. Look for buying near 705, which could create a minor rally, but I am looking for a decline into the 680's. Long term, the 620's cannot be counted out, especially if El Nino turns out to be a dud, or if Asian buying dwindles due to financial problems. I know that sounds extreme, but the low 620's were our October lows, which are much more recent than they seem. Conversely, solid evidence of El Nino problems will send the beans sharply higher. Option traders should buy puts on rallies.

M. Steven Morgan

Consensus National Futures and Financial On Line Index

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