Bean Crush Bifurcates
The prospect of German
legislation banning animal by-products in the use of animal feed squeezed
soybean crush products to extremes in Monday’s session. Fresh cases of
mad cow disease have inspired the German parliment to consider banning a
potential culprit, animal bone and animal bone meal, as feed for livestock.
Soymeal
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Outlook before it broke out of its base, gapped sharply higher on calls for a
Europe-wide ban on animal meal in feed Monday, and settled at a contract
record, up .7 at 187.6.
Duke Heiberlein made the observation in Friday’s
installment of the Futures Trading Outlook that soybean oil had broken down
below prior support and look like it was ready to continue “leaking.”
Bean oil, which also registered a
New 10-Day Low, closed .4200 lower at 14.4800, at a multi-month low.Â
What’s going on with the divergence in the meal and oil
crush products, the products of soybeans? The thinking is that the fundamental
demand situation in meal will be substantially altered if Europe approves a
continent-wide ban and will have to substitute soymeal as a protein source for
livestock. The US is the largest producer of soybeans and will essentially be
the only producer until Brazil’s spring crop develops. This implies a supply
shortage for meal.
In order to extract soybean meal, more soybeans will have
to be crushed, yielding a greater supply of soybean oil. Stocks of soybean oil
are already high as are stocks of a substitute product, palm oil. Malaysian palm
oil futures fell overnight, and lower palm oil prices worked to pressure bean
oil prices.Â
New York copper, closed since last Wednesday, rallied after a five-day
holiday hiatus from trading. The London Metals Exchange rallied
last week on a net out-movement of copper in warehouses. The proclamation by G.W.
Bush that he is the next president of the US also benefited copper, as
traders believe the economy will perform better under a Bush administration.
Copper gapped above its 20-day moving average this morning and continued
rallying off its opening print, to close up 2.10 at 84.20. This morning’s
Pre-Opening Metals Outlook also pointed out events in Asia that are
effecting this market:Â The combination of a higher equity market and
positive stories from China on demand should be enough to forge a bottom in
copper. China evidently bought copper on the Shanghai exchange. Supposedly small-
to medium-sized Chinese end-users were active!
Foreign currency futures moved higher against dollar index futures
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PowerRating). Traders were hesitant to initiate new shorts, concerned that the European
Central Bank may intervene to continue propping up the single currency. The Dec. Swiss franc,
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PowerRating) registering a Turtle Soup Plus One Buy
signal while the DXZ0 registered a Turtle Soup Plus One
Sell setup, was a tip-off that there could be a turnaround in the
currencies. DXZ0 closed down 1.45 at 117.00 and Swiss francs closed .0088 higher
at .5641.
In the softs, March sugar
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PowerRating) extended a week-long rally on high
demand forecasts from Russia. March closed .18 higher at 10.11. Sugar is a good
market for the 1090 Open Method due to its propensity to rally once without
retracing once it gets on a momentum streak.Â
Finally,
orange juice
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PowerRating) popped out of a flag pattern on a wide-ranging,
outside-day formation, a constructive pattern, to close 1.60 higher at 77.95.