Posted by: usset001 | April 17, 2009

Soybean spreads continue to narrow

May'09/Nov'09 soybean spread

May'09/Nov'09 soybean spread

One earmark of a fundamentally strong market is the narrowing of interdelivery spreads. Exhibit A for your consideration is the soybean market, where the May’09/Nov’09 spread has narrowed dramatically since the first of the year. In early January, the May’09/Nov’09 spread showed a tiny positive carrying charge, i.e. the November contract traded at a small premium to the May contract. This spread went to an inverse within the first week of January and traded in the range of a 30 to 70 cent inverse (the May contract higher than the deferred November contract) between mid-January and late-March.

Since the start of this month, the narrowing trend of the May’09/Nov’09 spread has resumed and accerlerated. What started as a 60 cent inverse in early April closed last night at 117 cents. Narrowing spreads speak to a strong market. As long as the narrowing trend continues, I am friendly towards the soybean market.


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