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(September 26, 1997) SOYBEANS: BEAN HARVESTING THROTTLES AHEAD–Harvest reports of 50+ beans in nearly every state are coming in. We do not think the market has fully traded this size crop. If we raise the crop 1% as USDA normally does in October, production hits 2779. Stocks will then hit 300 mil. bu. or about three times the inventory we had this year. There have been two years since 1965 when bean stocks increased 150% or more. In 1966, futures fell 18% from the summer high to the October low. In 1973 futures sold off 39% from the summer high to the October fall low. In each case, the market sold off until the October low was put in. If this years 150% increase in stocks causes a similar price reaction, November futures would bottom between 617 and 465 and would bottom in October. Currently, our economic forecast calls for a sell off to the 570 area. Technically, 570 is very realistic. Maintain all shorts and sell more futures against the long term down trend line. Or buy two 625 November puts and sell two November 650 calls for every short you want to have on. The cost is only $350 each or 700/unit. In the last few days we bought oil and sold meal. China first announced they were going to raise import tariffs for oil, then said they would not, and finally today said they would. Based on the latest announcement, we held the position as it should help our spread.
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