Our focus today is soybean meal which has shown sharp gains that were initiated specifically in the nearbys with fund short covering and cash demand. Prices have rallied to their highest since the June USDA crop report. Despite eastern Midwest farmers progressing well with harvest and delivering beans to crushers it is a lack of rail cars and logistical difficulties that are producing what we describe as a cash bottleneck.

Southeastern pork and poultry producers needing meal are being forced into double booking cash meal, taking trucked in supplies whilst awaiting rail car deliveries that are currently delayed, possibly arriving later in the week. This is a pretty generalised description of the acute difficulties being faced in the short term. The double booking is creating a false demand picture for the long term but reflects short term cash demand.

The meal rally is leading the advance although grains and beans are not displaying anything like the strength of meal, which in our view, fully justifies the observations above. Producer hedging in the grains is helping to cap any upside at this time.

Soybean meal cash basis for Nov and Dec IS retreating lower, but focus (rightly) is on the spot month alone right now. Brazilian farmers who are enjoying the CBOT rally and a sharp drop in the Real are taking the opportunity to hedge considerable soybean volumes in Chicago which in turn caps upside.

In conclusion, we feel the meal market is giving entirely the wrong message to the market right now! The US does not need to see any further switching or cancellation of meal sales given its likely record supply position. Meal markets, specifically nearby, but also into year end have reached a level where S American supplies pencil into the US as imports. The price squeeze is as a result of a tight logistical situation. Western Midwest meal is offered $5.00 below Dec ’14 CBOT!!!!! Nearby issues and difficulties will be resolved in coming weeks and we doubt that this rally in meal can be sustained.