Soybeans have Caught fire but that should spillover into other Ags…

The easy money has been made on November soybeans longs in my opinion. I am not calling for a top and do think futures will work higher but the risk is increased as futures have advanced 19% in the last three weeks lifting futures near 11 month highs. Perhaps a better play is buying other crops that should trade higher alongside beans. A rising tide should lift all boats.

So why are Legume prices appreciating?

  • The Brazilian Real may have found a bottom and has started to appreciate in recent sessions.
  • Blistering hot temperatures across the Corn Belt with no precipitation forecast in the immediate future.
  • Dry July and Augusts’ in years past has led to a below trend line yield in soybeans and with crop progress out today the market is expecting a further 2-3% decline in conditions today.
  • Most recent COT shows funds adding length in bullish trades.
  • Technically a trade above $14/bushel there is little upside resistance for another 50 cents/bushel.

Soybeans:

soybean futures - soybeans

Soybeans Futures chart for August 26, 2013 – Soybeans

Let’s take a look at December corn and December wheat and have a game plan.

Corn:

Corn futures - Soybeans articles

Corn Futures chart for August 26, 2013

After finding support just below $4.50 bushel two weeks ago corn has rallied 50 cents/bushel lifting future to $5 for the first time in the month of August. As of this post futures are approaching a daily limit move, higher by 6% and above the 50 day MA (blue line) for the first time since 6/27. Use the Fibonacci levels on the chart above to help guide trade. At this point I am not ruling out a 100% Fibonacci retracement lifting this contract back near $5.70/bushel.

On the Midwest crop tour last week it appears lower production looks likely and if this weather persists it will likely hit yields as well. Like beans Managed Money and Funds were buyers of maize in recent sessions. Short covering is playing out and I think a trade north of $5/bushel will attract fresh buying.

Wheat:

Wheat futures chart for the soybeans article

Wheat Futures chart for August 26, 2013

$6.40 appears to be the line in the sand as multiple probes under that level were rejected in December wheat. Futures are currently 5% off the recent lows and trading above the 50 day MA (blue line) for the first time since 6/21. Wheat will look for guidance from other Ags and will follow them higher in the coming weeks in my opinion. Use the Fibonacci levels in the chart above to help guide you. A key development today was a break above the down sloping trend line that has acted as resistance since mid-June.

At risk of sounding like a broken record weather will play a factor and Managed Money and Funds are getting more active. Exports have been relatively diminutive of late but expect countries to book purchases in the next few weeks to avoid paying up in the coming months if this ascent in Ags really gets further legs.

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Bradbard Research

As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… you can reach me at: mbradbard@rcmam.com or 954-929-9997

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.

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