This is a sample entry from Craig Turner’s email newsletter, Turner’s Take, published on June 03, 2014.
I have not talked a lot about soybeans lately because it has been such a difficult market to trade. The dynamics between old crop and new crop right now are so different that they may as well be two different futures markets. If you want to trade soybeans, maybe the best way to do it is to use the SN/SU spread for old crop and the SU/SX spread for new crop (I’ll expand on that in a little bit).
As for the current stay of soybeans, we are 78% planted vs the 59% from last week and the 70% five year average. New crop is off to a great start. One can make the argument new crop soybeans are overvalued by $1.50 to $2.00 based on current new crop production estimates. However, unlike new crop corn, new crop soybean does not have an adequate carry in to make up for production losses. If old crop continues to be tight from now until harvest, new crop prices will most likely remain elevated until we get past critical growth stages.
Bears are arguing reduced Chinese demand, lower Chinese crush margins, soybean exports from Brazil to USA, record production in SAM, and record US new crop will send prices much lower. These factors are more focused on new crop.
Bulls point to tight old crop stocks, strong export demand, and a strong crush market in the US. These factors are more focused on old crop.
For old crop/new crop, SN/SX has been very volatile and difficult trade and for now seems to remain high until the USDA tell us old crop stocks are adequate to get through the marketing season and into new crop harvest. Old crop and new crop are a tale of two different worlds right now. Interestingly, as SN/SX and SN/SU are making a run at recent highs, SU/SX has been trending lower. Perhaps bulls looking to play old crop tightness should be looking at SN/SU instead of SN/SX in an attempt to cut down on the volatility while bears looking to play Brazil exports to US and large US new crop production should look at bear spreading SU/SX instead of SN/SX.
Subscribe to Turner’s Take Newsletter & Podcast
Turner’s Take Newsletter & Podcast - Turner’s Take is a complimentary weekly market commentary newsletter that covers the Grain, Livestock and Energy futures spread markets using fundamental, technical and seasonal analysis.
Inside the Grain & Oilseed Markets - Free eBook
Download your FREE copy of “Inside the Grain & Oilseed Markets” and learn the ins and outs of the markets that will help answer many of your trading questions.
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.
THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.
TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.
YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.