The Morning Vibe

13/11/12 -- Fund selling, you never know exactly when it's coming or what is going to trigger it. Frequently it would seem the thing that catches us all off guard is that the trigger is something that we've known about for some time.

Like the European debt problem, or the US "fiscal cliff" or impending record South American soybean production. None of these are "new" items, yet these are amongst the reasons being cited for the sharp sell-off in soybeans that has dragged the market down to more than 4-month lows.

The other main factor being mentioned, which wasn't known when the market was peaking in late August/early September, was that drought damage to the US soybean crop wasn't going to be as bad as feared (up 7.6 MMT since then). Then again though, at that time neither did we realise what the extent of early season US export sales were going to be like (full season 2012/13 US exports projected up 6.4 MMT since then). Out of interest, the USDA was forecasting soybean output from both Brazil and Argentina at 81 MMT and 55 MMT back in August, the same as in last week's report.

The bottom line seems to be if and when the funds are in full one risk-off liquidation mode, dragging in weaker capitulating longs, then the market is only going one way. The question we now need to ask is how much longer will this selling continue, as it will undoubtedly provide an opportunity to get some cover on at much better levels than we may have expected a month or two ago. Oh for a crystal ball...

It may be prudent to stand aside whilst the elephants are stampeding for the soybean exit door. You won't get in at the bottom, but you should also avoid getting sucked in on the way down.

This morning sees beans around 10 cents higher in mini Turnaround Tuesday style, but having fallen almost a dollar and a half, or 9.5%, since the first of the month based on last night's close you could hardly call 10 cents a major reversal.

Under the circumstances wheat and corn have done rather well to attempt to distance themselves from things. Corn is down 4.4% since the beginning of the month, whilst CBOT wheat has only fallen 1.2% during this time.

London wheat on the other hand is still GBP4.25/tonne, or 2%, higher than it's Nov 1st close despite last night's weighty demise. Similarly Paris wheat finished last night EUR5.00/tonne, or 1.8%, firmer on the month so far.