Soybean Update 4/5/18

Summary

• Soybeans sold off heavily in the early morning hours of 4/4/18 following tariff announcements from China, but have recovered their losses.
• The SOYB ETF might help investors diversify their portfolio away from stocks without the need for a futures trading account.
• The volume profile and OPEX Price Magnet for soybeans point towards slight gains for soybeans in the weeks ahead.

Introduction

Soybeans sold off heavily in the overnight session and early morning hours of 4/4/18, following the announcement of tariffs by China on imported agricultural products. Since China is a big purchaser of U.S. soybeans, the sell-off erased all of the recent gains in soybean futures.

In our investment portfolio, we will occasionally have long or short positions in soybeans and other commodities because we like genuine diversification to stock indices, particularly since the current P/E valuations in stocks appear to be extended.

The Teucrium Soybean Fund (NYSEARCA:SOYB) provides investors unleveraged direct exposure to soybean futures without the need for a futures account. The SOYB ETF holds three corn futures contracts, and periodically rolls them by selling the current holdings and buying other futures contracts. Here are the holdings of the SOYB ETF as of 4/3/2018.

At a value of $10.00 per bushel, each futures contract (which contains 5,000 bushels) represents $50,000 of notional value and many retail investors will not want to allocate that much value to a position in soybeans. For these investors, and also for those without access to a futures trading account, an investment in SOYB might provide commodity exposure that is not correlated to the S&P Index.

SOYB ETF and Soybean Futures

Like many commodity ETFs, there has been a historical time decay in the value of the SOYB ETF relative to the front-month values of soybean futures.

It appears that the relative time decay for the SOYB ETF is less pronounced than the time decay for the CORN ETF, so investors who want agricultural exposure in their portfolio (and don't have futures trading capability) might generally prefer SOYB to CORN.

Volume Profile of the front-month futures contract

Since the beginning of November 2017 (close to the beginning of the current agricultural year), the “Point of Control” for the May 2018 soybean futures is near a value of $10.50/bushel, above the current value. After spiking below the all-important $10/bushel level, soybean futures have recovered to its 50 day moving average.

OPEX Price Magnets

One of the trading tools that we use are the Price Magnets that we calculate each day for about a dozen ETFs and commodities. The Price Magnets are an iterative calculation that finds “delta neutral” and “gamma neutral” for specific option expiration dates.

The Price Magnets for the next three upcoming option expiration dates for soybeans are shown below. An introduction to OPEX Price Magnets can be seen by clicking this link.

Source: Viking Analytics

We will continue to monitor soybeans and SOYB for a long or a short position.

Commodity Conquest

In our Marketplace Service, we publish daily update on the option expiration Price Magnets for gold, crude oil, natural gas, S&P Futures and other key commodities and ETFs. In addition, we conduct buy-side coverage on eight energy and commodity firms. Our verifiable record of completed public trades From June 2017 through the end of March 2018 is shown below.

Disclaimer and Notes

All charts above were taken from Trading View unless otherwise indicated, and all tables were created by Viking Analytics unless otherwise indicated.

This article was written for information purposes, and is not a recommendation to buy or sell any securities. All my articles are subject to the disclaimer found here.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.