From the December 01, 2006 issue of Futures Magazine • Subscribe!

Soybeans chase corn

Grains have been discovered as an asset class, says Stephen Davis, senior broker at RJO Futures, adding that food is the new market play. “During harvest time, this is just incredible.” Davis says that strengthening Asian currencies and increased global demand are big factors pushing prices up, but that soybeans are riding corn’s coattails, as demand increases for both food and fuel. “Because of the price structure, they [South Americans] are planting less over there and that becomes a factor as well.” He picks a high of $6.95 and a low of $6.50.

“Beans are trying to keep pace with corn so we don’t lose more acreage,” says Anne Frick, senior oilseed analyst at Prudential Financial. “But the market tends to be a little quiet in December,” adding that funds will have built up net-long positions, which would reduce buying power. She also expects some profit- taking before the New Year. For December, she expects beans to trade between $6.50 and $7.00, noting that we could see a spike to $7.50. “The long term outlook is bullish and we will trade over $8 in the spring.”

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