The commodity I choose for the first time transaction is soybean. I expect a sudden collapse in a recent period in future market hence I went short for a short run speculation.
For fundamental analysis there are four aspects I concerned with: supply, demand, stock and policy. From supply respective: three major soybean produce country have decline in output. China , Brazil, USA. Except china, both Brazil and USA are suffering from drought during soybean’s pod bearing period which will largely affect the output. The shortage in supply is also the root cause of soybean’s constantly increasing price. Policies of each countries preferred to reserve stock and encourage output. Also, Stock is reached the lowest level of the year.
From demand respective, from 2012~2013 the consumption of soybean will decrease about 3 million metric tons for reasons of [i]: too high price and downward sloping consumption of biodiesel. However the price of soybean is constantly mounting which has arrived a historically high price. From the historical data of Mundi index[ii], in the last 8 years, the price is around 300~400 per matrix ton. In 2011, the price went up to 400~500, and this year all the way up, goes up to an unreasonable high price of 622! Hence I believe there is a big bubble in soybean future market. Every spike followed with a collapse. As well as the policy in each country will also effects. Take china as an example, the government is plan to release 0.4 million tons of soybean to the market in sept. 27. That’s why I expect a sudden recession will occur in octorber.
In a long horizon, the price may recover after the sudden decrease and reach to a plateau. Next year the price would be even higher because of the storage cost. Hence, for a short run speculation, I went short for soybean.
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3 responses so far ↓
Hi Amber.
I like your four sub points to address how four factors affect the soybean price: supply, demand, stock, and policy. Next time to research my commodity, I think I need more carefully research about it.
I just add that form what I saw in Mike’s blog. He said that Brazil, one of main producer, plans to grow large amount of soybean. It is approximately 140 million tons of soybeans, which is measured more than 30% increasing from the previous year. Brazil plant soybeans from August to December and harvest from February to May. So I think we could say that there is increasing supply of soybean. It is from not only China’s release of soybean but also Brazil’s new harvested soybean.
In your blog, China plans to release 0.4 million tons in Setp 27th. I guess China has large storage to affect world price.
By the way, do you think when is good time for selling (short) soybeans. Do you assume following December would be okay to be short position or non- harvested period in the next year?
Even though I do not research about soybean during first week, I think I would like to trade some of soybean trade next week.
Thank you for sharing your market analysis on soybean.
sorry elly, i didnt know the comments should be approved that i didn’t even see it. thanks very much. i appreciate your comment to me.
soybean is still on a high price which i think might last for a few weeks( though some little flucuation may happens) since it is so unstable. i would like to wait until next week to back to soybean. Besides, i think go long for the contracts in next year will be a good choice, considering the storage cost.
i think all speculation goes with luck. hope that we can get good luck always.
cheers.
Hi Amber,I like your logical analysis on the soybean futures. Please include comments on the calculation of transaction as well as equity balance next time. Also please do separate postings for your blog as Prof Jim advised.