Export sales for soybeans last week came in at 666 thousand metric tons up 1 percent over the 4 week average. It was a weak number at best. Key player China was in for 686 thousand metric tons and a reduction of 467. This means that China canceled an order bought at higher prices to purchases back from Brazil at a price of 30 dollars per ton cheaper than U.S. posted prices. Then China bought 686 thousand metric tons at a cheaper value. This shell game is bearish for demand. New crop sales for delivery after September 1st saw no Chinese purchases. Clearly they are waiting for the glut of the Brazilian harvest to begin. The USDA crop report was a yawner coming in showing ending stocks at 450 million bushels up 10 million bushels from the month prior. But all is not bad as we have 3 reports that lie ahead that should create fear in the minds of short position traders. One is the Ag forum report where the USDA estimates how many corn and bean acres will be planted this year. Number two is the early March monthly crop report and its uncertainty. Finally at the end of March we get the long waited planting intention report where the USDA reveals the poll of farmers as to what they are going to plant this year. Though we may see a new low in beans near term we could expect short covering strength into these reports.
It is important to note that non- commercial and non- reportable traders re-shorted the market by a whopping 44,455 contracts last week, bringing their total net short to 89,114 contracts. For soy meal, the combined fund and speculative short position hit a new record short level at 46,689 contracts. It is my belief that once we roll into March, that short covering alone could result in higher prices regardless of anything else that enters into the market. With this in mind I propose the following trade. Look to buy the May 920 calls for six cents, or in cash value $300.00. The risk on the trade is the price paid for the calls plus all commissions and fees.
For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 PM central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for next week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup. Or please contact me at anytime at slusk@walshtrading.com
