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COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(December 4, 1997) SOYBEANS: Funds and excellent growing weather sent the beans to a new low and a new low close. Good demand continues to war with ample supplies. There have been no meal deliveries as of yet, with the cash meal market above the nearby futures, a bullish sign. This could provide ongoing support. However, the market continues to be concerned regarding the possibility that Asian imports will decrease as a result of the recent economic problems. There is already talk that Asian poultry demand is down, which may lead to lower meal prices as meal is chicken feed. The Brazilian crop is 72% planted, with no problems. The chart is negative, but buying has emerged thus far near the lows. Funds may be able to push the market around for now, as a sense of conviction seems to be lacking. However, if El Nino does not appear on the scene or if Asian problems are lasting, beans could have serious downside.
SHORT TERM–Resistance–Resistance basis January remains near 712-714, 724, 726-728, 733, 737, 741-742, 748.
SUPPORT–Support basis January beans remains near 705, 700, 690-695, 687.
RECOMMENDATION–Until such time as beans can score highs and hold them, I would be skeptical of their ability to trend higher. The chart remains negative. If January beans take out the 700 level, the sellers may become more aggressive. For now, however, January beans have been able to hold above the 700 level Aggressive short-term traders might sell January beans on rallies to the 710-715 area with stops of 5-10 cents or over 724. Look for buying near 705, which could continue to provide support, 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 the 620's sounds extreme, but those 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
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