Soybean futures prices (sf15) have recently risen from low 9.00 area to over 10.00 on a record crop. The prices are very strange because weather is good is US with a record a crop. Normal psychological worrying about South American drought seems contradicted by recent rains. I see the situatiion similar to the still 1/3 hedgies short position in EXAS using OPM who are giving me a lot of money. Maybe there is some kind of short squeeze by crushers who want immediate delivery because the crop is slightly delayed. USDA report seems to indicate almost normal bean harvest progress. Most amazing patrt of pricing is seemingly because farmers are hypotizied by "infinite Chinese bean demand" in spite of facing large crops that will soon be dumped on their front lawns, farmers are not yet hedging crops. Short bean seems sure fire trade to me when farmers wake up start and hedgiing.
... Not sure how to reply to myself , but I am obviously wrong and got stopped out today! My now small deltas in covered short puts helped a little. $10 per bushel soybeans are now seemingly record harvest lows.
The daily ranges have been expanding in Soybeans. I am expressing my short in Corn. Even there, there's still a lot of heat. Don't kick yourself. Thanks for the analysis.
There was supposedly a shortage of soymeal on the east coast, which exploded soymeal prices higher. Allegedly, the crush plants couldn't get the rail cars to get it moved. Soymeal prices got so high that they are importing a barge from South America, despite the record soybean crop. Once the soymeal thing works itself out, it would seem to be bearish. However, it looks like funds have been playing the grain markets pretty heavily in the past week.
I gave up trying to trade beans. Short puts (covered short writes) retrieved about 1/3 of my loss. The market (Jan. futures) fell from 1060s to 1020s on Nov. futures expiration. People needed to make deliveries and settle so my fundamental analysis was right. I made the same mistake of thinking that fundamentals effect the futures market back in the 90s with heating oil versus gasoline. A record crop sure fire short ran into too much speculative money sloshing around the system. I think because of so much crude being shipped by rail, the transportation problem was real, but I am sure farmers hedged their huge crops but speculators were a more important factor. I think I learned somethng from the loss. Namely, my timing if off. I basically enterered at the weeks average price and sold at the current about 1030 average (weekly VWAP). I could have made money just buying under the VWAP and selling over, but I never can time my trades right. My new idea is to only start positions when the market is stable for a few days and try to exit on spikes. It would have kept me out of quite a few recent mistakes.
This bean market has been hot, and has been basically ignoring fundamentals. At some point, it would seem like it needs to revert to a fundamental market. I'm not sure what that point is, unfortunately. We could easily see $9.00 to $8.75 sometime in the next 3 to 4 months. I watch the soybean spreads as well, and they are all out of whack to. Tough market to trade right now.