- New Science in old markets -

Soy beans made a bottom extension – time to buy for the El Nino rally?

The September contract of Soya bean futures made a bottom extension on Tuesday, as reported in an Alphamail that advised covering remaining outstanding shorts in the November contract. We would now reverse into a long position. There has been some coverage given to a possible 'El Nino' event in which warm water flows across part of the Pacific, against the normal current for a season. This has disruptive effects on agriculture around the world, and especially on the stocks of small fish off the west coast of South America that are caught to make fish meal - a direct competitor for Soya meal.

This news about two weeks ago was greeted by a rally in Wheat that soon stalled but the logic was good - grains will probably get more expensive at some stage if this event happens and this early Wheat rally was just 'jumping the gun'. Now we have a bottom extension in Soya beans it is worth trying to get long here. There will probably be other recommendations to buy grains in the next few weeks - this may fizzle out, but the odds of an up-move some time soon are currently good. Buy November Soy beans.

We will not take this trade in our model portfolio as we have our maximum number of commodity positions already - we may take the trade if some space becomes available soon.