wmeubank@ocp.kcmo.com
ALLENDALE, INC.
4506 Prime Parkway,
McHenry, Illinois
(October 20, 1997) SOYBEANS: Fundamentals remain bearish as U.S. stocks double, world stocks increase nearly 50% and South American production could hit 30 mmt in Brazil, 48 mmt total South America. November beans took out 700 and 695 support. This reversed the weekly chart back down. A sell off towards 675 is now expected. If 675 does not hold, then a move to 650/625 could occur. Based on a study we conducted of similar years, 634 is possible if the market follows the same pattern. Based on a study we did of years when world stocks increase at the same time demand is surging ahead, we found 3 years with incredible similarity to this year. All three years rallied in October just like this year! And all 3 years sold off to make new lows by January (1 year sold off quicker and then rallied back up). The results are so consistent, we sold more beans today. We would also sell cash if basis hasn't collapsed. Long term, like corn, the beans market would rally significantly if there where a threat to South American growing weather. Thus long term, we want to buy and are already planing a trade: Buy puts now for 20 cents or less. Then on the break look to buy futures. Your equity will be protected if the market declines and if the market rallies then your futures will gain. This is currently cheaper than a call.
Bill Biedermann
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