wmeubank@ocp.kcmo.com
COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(October 10, 1997) SOYBEANS: SHORT TERM–Fund short-covering continued to send the beans to a new four-month high. Exports were better than expected. However, there is also talk that China may have canceled prior purchases of beans. This isn't uncommon from the Chinese, as they are willing to trade in and out of the market depending on the movement. Rains are forecast, which may provide additional support. A rumor that China had canceled corn exports continues to add support, but thus far there has been no confirmation of the rumor. It is likely that the lows are in. The range of guess is from 2.70- 2.86, with an average of about 2.77 or so. Numbers on either side of the range should move the market, a neutral number will probably be treated as bullish. The funds appear to mainly be on the sidelines, but recent news suggest that they may be hoping to become long for a good move. As is always the case, trade market action, not report numbers. Friday may be a volatile day, so use caution.
LONG TERM–Longer term, I remain bullish on the bean complex. I am bullish on meal as world livestock production has increased, especially in Asia, and demand should remain strong. Oil should remain strong due to production problems in Southeast Asia. Demand is also very strong for oil. El Nino may exacerbate any problems, and add to the bullish tone.
RESISTANCE–Resistance remains near 680, 689.
SUPPORT–Support basis November beans remains near 675, 652-655, 642-644, 636, 625-630, 618-620, 610, 605, 597-594 and near 585.
RECOMMENDATION–Aggressive traders might consider buying November beans on 5-10 cent pullbacks with a stop of 10 or so cents. I would also contemplate buying December oil on 20-40 point pullbacks with 50-100 point stops, and December meal on 3-7 dollar pullbacks with 3-5 dollar stops. Objective open. Beans have tacked on quite a premium in the face of this report, so conservative traders should stay on the sidelines. Aggressive option traders might look at selling 700 November or January beans calls on rallies from current levels. Risk about 5 or so cents. Bullish option traders might use calendar spreads, buying March or May, and selling January or November calls. The volatility has contributed to excessive option premiums, so option buyers may wish to remain patient.
M. Steven Morgan
Added to the WWW 10-10-97
Last updated on 10-12-97
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com