COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(March 23, 1997)

GRAINS:

The key to grain prices between now and summer rests with the March 31 stocks report. My work suggests the report will hold a bullish surprise and be the spark that pushes soybean prices towards double-digit levels. It was my hope that nearby soybeans would fall to the $7.80 level prior to the report, thereby presenting us with a low-risk buying opportunity. It is now my conviction that between now and report, nearby beans will not even drop as low as $8.20 a bushel.

Therefore, it is important to establish another long position in old-crop beans as soon as possible. For now buy (2) August soybeans at the market. This new position in old-crop beans will put us long against (2) existing short November beans at an average of $7.32 1/1 per bushel, We are locking in profits on the November side of 20 cents a bushel. But keep in mind that if the March 31 report is bearish, the profits in this spread may evaporate rather quickly. In addition, I would like to buy (2) July beans and sell (2) July wheat at the market. Risk on this trade should be 30 cents per bushel from point of entry.

Soybeans should not drop below the $8.20 level between now and the report. But prices could rise back toward the $8.60 level or so just before the report. If that happens and the report does indeed hold a bullish surprise, beans will not trade until they top $9.00 a bushel. It is far better to take a bullish stand at this level towards soybeans than to have to fool with them once they soar to new highs.
Jerry F. Welch

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