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Soybean Meal: The Next Silver?

ByPeter Brandt
Published 07/04/2012, 01:52 AM
Updated 07/09/2023, 06:31 AM
SI
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A weather market in grains is something to behold

When a weather market develops in the grains a chartist might as well throw away his or her charts.

The jet stream has been pushed north all winter and spring. The result is dry weather at a critical point in the growing season in much of the corn-belt states.

Grain prices are strong today because there is no rain in the forecast. If we come back after the July 4 holiday to wide rains in the corn belt, then prices will be sharply lower. If we return on Thursday to a dry forecast for next week, and especially if we remain dry next Monday with no rain in sight, then look out.

The question is whether the charts offer any clue for “how high is high.” In fact, the Soybean Meal chart does offer a clue.

Shown below is the quarterly chart of Soybean Meal dating back four decades. This chart shows that a massive base was completed in 2008 followed by a hard retest and consolidation. This period of consolidation was resolved by the advance in April.

Soybean Meal Chart 1
It can be argued that the construction of the Meal chart is presently right where Silver was in September 2010 prior to its price explosion. In other words, if the corn belt gets plenty of rain, the Meal chart will continue to consolidate. If rain is not sufficient, the Meal chart is set to go now.

Comex Silver Chart
Importantly, the end-of-month June close was a new all-time high monthly close, as shown on the monthly graph below.

Soybean Meal Chart 2
The daily Meal chart shows that Monday’s up gap is a potential weekly and daily break away gap.
Soybean Meal Chart 3
The measured target for a bull market in Meal (whether it takes place in 2012 or in some future year) is 610 per ton.

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