Commodity Trader's Almanac 2O11

92

SOYBEAN’S HARVEST LOWS

OFFER POTENTIAL FREE MEAL

This is generally not the time to sell short, especially

after a prolonged decline from a peak in price at the

June highs. Traders should not be looking to sell on

any further weakness in early October; in fact, this is

the time to cover short bean positions. Typically, this

is the time of year when soybeans post what is

known as their harvest lows.

Soybeans are a cash commodity because end

users with feed operations that use soy meal to feed

livestock and poultry must purchase hand-to-mouth,

as soy meal does not have a long shelf life. Fresh new

product is being rushed to cattle and hog feed lots as

well as to poultry operations, and ex ports of soybeans

are being marketed. This wave of demand starts to

create a floor of support in prices (page 161).

To take advantage of this seasonal trend, traders

can go long soybeans on or about October 24 and

hold until around November 9. In the last 42 years,

this trade has worked 26 times, for a 61.9% success

rate.

The chart below shows the price of Monsanto

(MON) overlaid on the price of soybeans. MON

makes Round up Ready soybean seed and has a

joint venture with Cargill to commercialize a pro-

prietary grain processing technology under the

name Extrax.

Monsanto correlates very well with the price

direction of soybeans. It also forms its average sea-

sonal low in October. As was the case in 2009, tech-

nical analysis ...