The grand daddy of all the sharp knives has to be soybean oil futures. Hedge funds bought soybean oil as a hedge against food inflation. When you live by the sword, you may die by the sword is the mentality at hand. As soybean futures liquidate, soybeans and meal are not too far behind. Look for upcoming harvest delays in central Brazil but not to the magnitude of jeopardizing crop quality just yet. World demand for vegetable oils continues strong and with weakening prices along with a weak US dollar, it is becoming a better bargain day by day. Bearish to US soybeans is a record Brazil soybean crop of 61 to 62 million tonnes and the competition it is expected to place on US soybeans as the Brazil currency continues to favor aggressive exports.
Fundamentally, Allendale is bullish to soybeans, soybean meal and soybean oil futures but at the moment we are technically bearish. Money flow is the key, not only to oilseeds and its products but the starches as well. At present the situation at hand is a money flow game and has little if anything to do with existing fundamentals. Like corn, we are willing to sell corrective rallies, but will utilize a risk-reverse just in case investment funds regain consciousness regarding tight supplies and increasing demand for protein and vegetable oils. Please call one of our brokers for specifics.
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