I have been writing of late how the strength in the meal has led the entirety of the grain floor higher, as it has been dragging not only the actual beans higher, but also the corn. It now appears that the beans themselves, which had been moving higher but had not put in as impressive a performance on the charts as had the meal, are now doing just that.
Bulls have not only managed to close a significant chart gap, but they have also bested a key technical indicator, namely the 100 day moving average. That level should now serve as support on any downside tests for the bulls to maintain control of this market.
If it does, the next likely target for the bulls is near the highs made in August. As unlikely as it seemed based on the size of the mammoth crop, the logistics involved in an historically low 2013-2014 carryover of some 90 million bushels, have set meal and bean buyers competing against each other to secure sufficient supplies to meet current demand.
I do not know how long this can last in front of such a massive crop but one cannot argue with the charts and expect to either prosper or survive, especially in this day and age of gargantuan hot money flows which obliterate everything in their path. With so very few commodity markets moving higher on account of the strong Dollar, when funds do find a market that they can push from the long side, as they recently did with cattle, they will mercilessly force it higher to maximize their profits.
It is interesting that the Brazilian Real continues to sink against the Dollar making US beans less and less competitive on the global market but for now, no one seems to care as the mad scramble is on to obtain meal supplies, regardless of cost. How the bean and meal markets end this week is going to be key to whether or not this is the merely the waning moments of a counter trend move or the actual start of a new bull trend.
I will be the first to admit that I did not think this was possible given the currency differentials, the soaring Dollar, and the size of the crop, both here in the US and what is expected in S. America. There is certainly not going to be any shortage of beans based on all the available information we have but apparently demand is there to absorb it all, at least for now. I still wonder what is going to happen to prices when the supplies of meal become more plentiful and crushers' margins start to erode.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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