I am a day late in blogging about the week ahead. Although hurricane Sandy hit New York, commodity traders felt the impact more in Chicago more than the investors trading at the Wall Street Stock Exchange (the New York stock market was off today and very likely to close tomorrow as well).
The price of 2012 November soybean decreased by 2.3 percent to $15.27 a bushel at the end of the day. This is due to a couple of reasons. Firstly, Hurricane Sandy disabled liquidation of funds in New York stock market, therefore, the soybean prices felt the downward pressure as traders sell hedge funds to raise cash. Secondly, the 2012 November soybean future is nearing its expiring date, hence, investors have started to quit and sell off the contracts at hand. Thirdly, better weather is experienced in South American areas that are planting the oilseed. This implies that prices would decrease due to stronger future supply. Lastly, there are increased orders of price spreads that involved the longing of corn and shorting of soybeans.
My strategy for soybean now would be to long because I expect the soybeans to regain value after the markets return to normal.
In addition, I am going to long corn because US corn exports would increase since competitor supplies from South America decrease. There is evidence that the US export volume this week is 15.5m bushels, which is significantly above the 10.4m bushels during the previous week. Furthermore, there is increase in the price competitiveness of the US corn in the world market (Brazil corn was cheaper than US corn by a dollar per bushel one month ago and the price difference narrowed to a quarter dollar per bushel currently).
One cool source of information as recommended by Iris is http://www.agriculture.com, which has comprehensive commodities market commentaries. It is always good to look at commentaries from various established websites for cross checking purposes.
Thanks for sharing your analysis. Enjoyed reading. Keep up the great work!