This article is brought to you by:
M. Steven
Morgan THE WINDY CITY
TRADER P.O. Box 1673, Chicago,
Illinois (October 14, 1997) SOYBEANS: Last Friday's
USDA report was especially supportive to soybeans. The trade was
estimating a crop of 2.77 billion bushels with some estimates as
high as 2.8 billion. The number came in at 2.72, a drop of 50
million bushels from the low end of the scale. Considering that
ending stocks (amount left after all requirements met) were
expected to be near 200 million bushels, a 50 million drop was
rather significant. China has committed to over 4 million tons of
soymeal this year already, as opposed to 3.75 million tons for all
of last year. South America is off to a very slow start for this
years planting. As you know, they begin planting during late
September and harvest during late January into February. Conditions
remain extremely hot and dry there to date. A poor season here
could possibly be the catalyst for all time highs in soybeans. This
is probably why we've seen almost no producer or hedge selling to
date. Many traders have been calling asking whether or not to take
profits in their beans and bean call options. Our best response is
to ask if you are looking short or long term. After a $1.00 rally
in 2 weeks in beans, it certainty is possible for a 30-40¢
profit taking rally. For the long haul, however, we have yet to see
any evidence of negative news. In that regard, we think long term,
the market will trend higher, possibly considerably higher. If you
have multiple contracts and are a bit nervous, you might consider
selling a portion of your holdings and wait for a slight pull-back
to reenter. The USDA report for corn came in at 9.3 billion
bushels. The trade expected 9.4-9.5 billion so 9.3 was slightly
bullish even though it was a big crop, historically speaking.
However, declining stocks worldwide should continue to support this
market. China announced last week that they are cutting corn
exports. They also have committed to a minimum 250,000 ton purchase
from the U.S. Some sources believe this figure could go as high as
1,000,000 tons. Keep in mind one important fact. The rally in 1995-
96 was demand driven with China a major purchaser of corn and bean
products. This is a country that we did not do much business with
until the past 4-5 years. When looking at charts and statistics
from 10, 15 and 20 years ago, keep in mind that the largest nation
in the world was not a major player then, as they are now. Wheat
does not have nearly the demand as beans and corn right now, so it
should continue to follow their lead. | Stephen Connell and
William Frejlich
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