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Grains and Vegetable Oil See Lowest Prices of 2014

David Becker
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Grain prices have been hammered during the past few weeks spilling over into vegetable oil prices which have seen prices slip to the lowest levels of the year. Bench mark soy bean oil prices sliced through support levels following a USDA report that showed soy beans in large supply. U.S. Department of Agriculture estimates that this season’s soybean harvest could reach a record 3.8 billion bushels, which is 165 million bushels higher than its estimate last month.

Hedge fund traders exited long position and added to their short position in the latest week according to Fridays release of the Commitment of Traders report released by the CFTC. According to the Commodity Futures Trading Commission, managed money reduced long position in futures and options by 2.6K contracts while increasing short position by 5.4K contracts. Managed money long position outweigh short position by 70K to 61K.

Bean oil futures prices hit a 4-year low last week at 36.70, and is poised to test the 35.70 lows made in May of 2010. Despite the potential for a very strong harvest prompt prices have moved back into contango which reflects the weak prompt demand for bean oil. Resistance is seen near the breakdown level at $37.61 as well as the 10-day moving average at $37.96.

Momentum on August bean oil futures prices is negative. The MACD (moving average convergence divergence) index generated a sell signal (where the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread) in early July and continues to have a negative trajectory which points to further price declines.

The relative strength index(RSI) which is an oscillator that measures overbought and oversold levels continues to move lower with price action which reflects accelerating negative momentum, while printing a reading near 29, which is below the oversold trigger level of 30 and could foreshadow a correction.

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