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COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 5, Orleans, Massachusetts
(October 2, 1997) SOYBEANS: SHORT TERM–Fund selling and harvest pressure continue to pressure the markets. The only positive note was sounded by a firming basis, probably due to slow farmer selling. Before you run out and buy beans, keep in mind that farmers are busy in the fields, and unless in immediate need of cash, are too busy to take beans to the market. They are probably also a bit disappointed due to the collapse in basis levels when the September went off the board. If it rains, look for increased farmer selling to appear. This has been forecast as a record crop, so don't be in a hurry to buy. Current forecasts call for clear weather for harvest. News of South American and Chinese buying is a bullish background development, and may provide support on dips. Keep in mind, it's buying on the highs that we need to see to send this market higher. Seasonals strongly suggest lower prices. In 14 out of the last 15 years, November beans have declined into the first week of October. Cash meal prices are eroding.
LONG TERM–Longer term, I am growing more bullish on the bean oil. The problems in Malaysia are many and varied. One of the problems is that the smog from the forest fires is slowing maturation of the palm fruits, and it is feared that palm oil production will decline dramatically. Keep this on your radar screen, as it could be a solid long-term bullish play.
RESISTANCE–Resistance remains near 625-630, 636, 642-644, 652-655, 662-665, and near 680.
SUPPORT–Support basis November beans remains near 618- 620, 610, 605, 597-594 and near 585.
RECOMMENDATION–Traders should continue to sell November beans on tests of the high 620's low 630's with stops of 5-10 cents or over 642 or 652. Objective is a test of the 605-610 area, although support in the 620 area may be able to hold the market. Active traders might take profits there. While March oil and meal remain strong buys on pullbacks, I would remain patiently awaiting a buying opportunity. Those long oil or meal should tighten stops, and consider taking profits. Meal has a seasonal much the same as the beans, so far the time being, may be on the defensive. The Commitment of Traders report showed a large fund long position in the bean oil, so if still long oil, be alert for a fund-induced selloff to perhaps the 2330-2350 level basis December. Conservative traders and option traders should stay on the sidelines for now.
M. Steven Morgan
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