BARNES BROKERAGE CO., INC.

30 S. Wacker, Chicago, Illinois

(December 3, 1997) SOYBEANS: Been there, done that! It looks like this grain complex will be forced to deal with yet another record crop, this time from the southern hemisphere! Everything is coming up roses for a Brazilian bean crop, 80% in, and looking good–a record 30-million tonnes is forecast. Of course, it's only December and the crop is a long way from being made plus in! But the mere prospects of a big crop down south was enough to dump the market over a half-limit lower yesterday and extend its downside foray under $7.00 briefly today (January beans).

Since the November Crop report (November 10, 1997) the “El Nino Premium” has been squeezed out of the market as improved South American planting conditions and mediocre exports have allowed a 50-cent break in January beans (748-699). Still, the market is only 50 cents off its contract highs and over $1.00 of contract lows–not bad considering we just came off the biggest U.S. bean crop every (2.7 BB) and are facing a similar record situation in South America. Since Labor Day, the market has registered higher highs and higher lows on a monthly basis. A familiar pattern has emerged where impending big supplies or other bad news (Asian currency woes) has broken the market temporarily but the “Big D” has baled it out every time surpassing previous month's highs in the process.

In our opinion, the simple but elusive fact is we need record crops to stay even–that the records we've seen in the past 3-4 years have obscured our huge world-wide demand base, creating a false sense of security amongst producers, traders and analysts. We feel very strongly the market is a ticking time bomb and the first even mediocre crop anywhere could unleash an upside explosion reminiscent of the early 70's.

OBSERVATIONS AND FUNDAMENTALS–December Seasonal–Over the next three weeks, harvest selling dries up–any additional sales wait until the next tax year and the market generally goes higher.

Holiday Markets–Are here already and you know what that means–take those profits when you get'em.

Exports–Were good last Thursday, 705 (400-600), not so good on Monday 29 (32-42), the market going down in both cases as benign South American planting conditions prevailed.

USDA Crop Report–On December 11 should be a non- event without corn and bean production numbers, but then again it's a government report.

What's Ahead–All eyes will be on South America, El Nino and the Asian stock markets in that order! Demand will be the steadying bullish factor continually under-pinning the market.

We continue to feel the 30-50 cent breaks we've seen since mid-August are entry opportunities. The near-vertical $1.10 rally January beans staged in early October right in the middle of harvest was a signature move–clearly a harbinger for the 1997/97 season.

Use option strategies for staying power positions to capture the potential!

William D. Moore

Consensus National Futures and Financial On Line Index

Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com

wmeubank@ocp.kcmo.com