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Beans

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The Soybean market is once again at post 1970 historic lows. These chances don't come around often.

A few weeks ago, the United States Department of Agriculture released the planting intentions report of the country's farm community on what they intend to plant for their autumn crops. Heading into the report, the figures were guessed that corn acres would average upwards to 81 million acres. But the report surprised the world as the figure released was only 78.0 million acres, down 5% from 2005 and 4% from 2004. This would be the lowest corn acreage since 2001 when almost 76 million acres were planted. Why such a smaller number? Because when pushing the pencil, farmers figured with such high gas prices it wasn't cost effective to plant as much corn when the prices on corn remain at the low $2.00 a bushel in price. Farmers and Producers have sent the world a message. It's time for the Crude Oil/Food spread to narrow. The days of cheap grain are coming to an end.

Few realise the extent to which grain products are dependant on petroleum. Pesticides are made from oil. Commercial fertilizers are made from ammonia, which is made from natural gas. Storage and transportation are hugely dependant on oil. So far the big players have sidestepped the Beans, but it is just a matter of time before they turn their attentions back to this market, which I think will cause prices to explode higher; http://www.energybulletin.net/5045.html

The drought problem in the US is slowly but surely moving eastward towards the Ohio and Tennesse valleys. Already, in Kansas City, they are facing severe below rainfall totals as January and February were the driest on record. Recent observations taken by the World Meteorological Organization (WMO) indicate that the Pacific Basin is on course for a La Nina event this year. These La Nina events can have dramatic impacts on weather patterns around the world. 1973/4 and 1988/89 were La Nina years and quite possibly 1996 was one too. These were years when corn, beans and even oats prices went through the roof.

The world usage for soybean oil has doubled in just 10 years as China continues to be the United States' largest customer for soybeans. In the current marketing year that began September 2005, China has purchased 9.163 million metric tons of U.S. Soybeans(336 million bushels.). That's almost 50% of total U.S. exports. Two weeks ago, representatives for U.S. export companies met with Chinese Soybean processing companies at the Chicago Board of Trade and signed trade agreements representing 4.98 million metric tons of U.S. Soybeans and 20,000 metric tons of U.S. soybean oil. These soybeans are expected to be delivered this year. In 2002 a similar deal was struck by the Chinese Wheat delegation. Within three months Wheat Futures were trading more than $2.00 higher. There are 1.3 billion Chinese, and they take a lot of feeding. The Chinese 'factor' could turn the Soybean bins into 'gold' bins. A respected economist, Lester Brown, predicts China will be forced to turn to the world market for massive imports of 30, 40, and even possibly 50 million tons of grain per year sometime in the near future. This comes at a time when world grain stocks are at their lowest levels in 30 years.

Anyway, I covered my short Bean positions on the 5th of April, and am now long July '06 and November '06 Bean Futures, with a few longs in the November '08 contract too.

If the low is already in, as I suspect, then prices could eventually trade around the $16 mark, which would give a profit of 5,500% if you bought now($760 risk per contract to April 10th low). Even at $10.00 you would still get 2,000% ...which is not to shabby.

julybeansdailysmall2os.png

Disclaimer;

Trading Futures is not for the faint hearted. There are no guarantees.

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Trading Futures is not for the faint hearted. There are no guarantees.

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Thanks for sharing - I may have a speculative spread bet on it

Cheers

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Thanks for sharing - I may have a speculative spread bet on it

You're welcome. Beans are up 23 cents since I first posted, or about $1,100 per contract. They may retrace from here, but IMO long term the only way is up.

Good luck with your spread.

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What is the best way to buy soybeans futures?

Dr. Doom,

If you have never traded Futures but intend to, my advice would be to study the process first, rather than just finding a Broker and diving in. That may well be your plan anyway, but I thought it worth mentioning all the same. Find a 'system' that you think might suit your emotional temperament, and then 'paper trade' it until you are comfortable that you could make money using it. Due to the opportunities involved with leverage, trading Futures can be dangerous, but you will find that out anyway as part of the process. I would also advise you to learn how to apply effective Options strategies in your management of risk. DrBubb's your man; http://www.greenenergyinvestors.com/index.php?showtopic=214 The Options jargon can be a bit duanting at first, but don't let that put you off. Once you have done that you could try a simulated paper trading account, eg; http://www.lind-waldock.com/edu/ed_papertrade.shtml

I don't want to recommend a Broker for you because I have yet to find one who I would trust 100%. I no longer use one myself, but you will have to when you start off. We all did. I would suggest you call a few in the US and have a chat. The more knowledge you have the cheaper your Broker will be. You can pay up to $125 'round turn' per contract using a 'full service' Broker, or you can educate yourself and pay $7 a side as I do.

http://www.cme.com/edu/course/resources/gtsab9727.html

http://www.lectlaw.com/files/inv11.htm

http://www.commodex.com/learn/selectbroker.htm

I studied the process and it's dangers for 2 years before I entered my first trade ...ie, one year researching ...and then another year paper trading whilst applying my research to historical data. What I found was, the same people make consistant profits year in year out, so I kept pestering them until I found out how they did it. :D

Don't forget that it's a 'zero sum game'. Especially when making decisions based on advice from your Broker. As Ttrtr points out here;

Isn't it interesting that if a broker sells you shares, there is a reasonable chance that the broker is betting against you. Many larger brokers will sell you shares that they've borrowed themselves, shorting the stock off to you & winning the day when you sell back to them at a loss.

Being a newbie trader, there's every chance that your Broker will be 'taking the other side' on the trades you place through him. If he does he will be gambling on your inexperience and making a profit on your losses.

Good luck. It's a jungle out there.

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If anyone has bought Soybeans it might be an idea to watch for a potential reversal around the $6.27 area, basis the july Future. I'll be banking profits if it does, and then reassessing. If it goes above $6.30 I'll probably enter longs again. Prudent to lock in a profit, just in case.

beansjulyhighsmall6nk.th.png

No guarantees. Do your own research.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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