wmeubank@ocp.kcmo.com
BARNES BROKERAGE CO., INC.
30 S. Wacker, Chicago, Illinois
(October 8, 1997) SOYBEANS: A bullish explosion–smack dab in the middle of the biggest bean harvest ever–who would've thunk? It's easy to pin reasons to market moves after the fact–but the truth be known, the market tipped its hand last Friday 10-3-97 with inexplicable 5-minute upside bursts (6¢ in corn–10:30 AM, 15¢ in beans–11:30 AM) after endless days of listless, small-range trade. The initial catalyst was a weekly export number Thursday 10- 2-97 that led to a solid, but not spectacular 8¢ up- day.
OBSERVATIONS AND FUNDAMENTALS–1) Harvest–Big And Quick–A record drop combined at near record pace. As of 10-6- 97, 37% was done with the biggies (Illinois and Iowa) over 1/2 done.
2) Seasonal Over–Selling November beans outright and/or against long December corn/wheat ended October 5-7.
3) USDA 10/10/97 Report–Sparks, Leslie and the government are all looking for a 2.7 bean crop (2.746-September) and a 9.4 corn crop (9.268-September). Many were surprised the numbers weren't bigger considering the lack of frost and ideal harvest conditions so far.
4) Don't Forget About Demand!–Often times, during harvest, you get overly focused on supply–last Thursday's near-record export sales (1.41 million tonnes) helped shake us from this tunnel vision.
5) Tight Producer Holding–Many farmers are opting to store rather than sell as they await higher prices and postpone additional income until '98. And our supplies are “the only game in town” until the South American harvest in March.
6) El Nino–85 degrees lately in the “Windy City”–is it really October? the fickle weather phenomenon may be already slipping into the Midwest! Remember 1983?
Harvest pressure and demand have been “duking it out” for 8-9 weeks–resulting in a 50¢ trading range (600-650). But, in an extraordinary turn of events, November beans rocketed up 50¢ to 3-month highs (675) since our last writing. This would be an impressive move during any week, but is near miraculous during harvest, let alone the biggest harvest we've ever had. Harvest pressure will soon go away but demand won't. Stay with our option strategy–beans are still historically cheap–but not for long.
William D. Moore
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