Dukascopy TV and Tracy DeCarlo chat soybean futures

Transcript of the interview of Tracy DeCarlo, a commodity broker with DeCarley Trading, and Celest Skinner of DukascopyTV!

1. 2016 saw an overall disappointing year for Soybeans, as supply outweighed demand. Do you see this issue carrying over into 2017?

If there is one thing I’ve learned while following the grain markets, it is that the slate is wiped clean each year in regards to supply and demand fundamentals. Surprise changes in weather can dramatically alter yield in the blink of an eye and demand can quickly shift to alternative products or at the hands of economic changes. Thus, we are looking at 2017 in a new light. A dismal as the soybean market appears at the moment, we can’t forget that in January and February of last year prices were hovering in the $9.00 per bushel area but by mid-summer prices were approaching $12.00. This was a 35% bump in prices despite questionable fundamentals.

2. James Cordier, president and head trader of OptionSellers.com said they expect corn and soybeans to have a "20 to 25 percent rally this year." Where does your sentiment for the Soybeans market sit this year?

We tend to agree with Mr. Cordier. Much of the weakness we’ve seen in the grain complex is due to the stronger dollar. However, we tend to believe the upside in the dollar could be limited to the 1.05 area. If so, this should eventually provide support to markets like corn and soybeans and hopefully, open the door for a rally. Our friends at MRCI have pointed out that the May soybean futures contract tends to move higher from late January through early March. Specifically, a trader buying May soybean futures on the 28th of January and selling on the 4th of March would have been successful about 87% of the time over the previous 15 occasions. In other words, once we get beyond the January USDA Report, the best trades could be from the long side in late January.

3. Weather worries in both Brazil and Argentina at the beginning of this week saw futures settle 1% higher, how long do you see this bullish trend lasting?

Weather is almost always temporary and markets generally overshoot the true significance of a weather impact. In our opinion, the weather in South America was a good excuse for a short covering rally, but we aren’t convinced the market will be able to put together a sustainable rally until we see what the USDA has to say about the world supply and demand picture on January 12th and possibly even as late as the February 9th report.

4. For this year ahead what do you think is the biggest threat to Soybeans?

We believe the US dollar will be the key to 2017 in all of the grain markets. If the dollar index traded on the ICE exchange breaks above 1.05 it could be a game changer for the grain market bulls. If it holds, as we suspect, it should offer a floor to pricing. One thing is for sure, it is going to be an exciting year in the commodity markets.