Soybean prices have been playing catch-up to corn and wheat prices over the past several weeks as market participants began focusing on less acreage for soybeans being planted in 2007. Drought conditions in Australia have triggered a worldwide shortage in wheat, and demand for corn has been strong as newly built ethanol plants come on line to meet demand for alternative fuels. Because of those factors, the market has been anticipating that farmers are likely to increase plantings for corn and wheat in 2007 to make up for the shortage created this year.

The recent fallout of the U.S. dollar is also contributing to the bullish momentum in grains, since a weaker dollar would achieve competitive rates for U.S. grain prices in the global market. The large funds, which have had a notable influence in the market in the past year, also appear to be very comfortable adding to long soybean positions. There is speculation also that farmer selling will be contained at least until the new year for tax purposes.

From a technical perspective, long-term charts indicate that the soybean market could work its way toward $7.50 per bushel. (How they get there is a different story!) Near-term support comes in the $6.96 to $7 area, basis the March 2007 contract.

Trading Strategies to Consider

I will outline a few trading ideas I would suggest to take advantage of what I view as a bull market in soybeans using futures, options and a spread with wheat.

Aggressive Futures Strategy

Buy March 2007 soybeans (SH7) in the $7 area

Sell March 2007 soybeans (SH7) at $6.93 SCO (Stop Close Only)

The idea behind this strategy is that if the market stays above recent break-out levels at $6.93 ½, the bull trend should be in tact.

Futures/Options Strategy

Buy March 2007 soybeans (SH7) near the $7 area

Sell March 2007 soybean (SH7) 780 calls at 11 cents OB (Or Better) /Buy January 2007 soybean (SF7) 680 puts at 12 cents OB

The option strategy will give you some protection with your initial futures entry.

Soy/Wheat Spread Strategy

Buy March 2007 soybeans (SH7) / Sell March 2007 wheat (WH7) at 182

Initial target 250, risk 10 cents

The fundamentals match up with the long-term technical implications where the premium between these two markets are still at historical levels, and soybean prices catching up to wheat prices.

I hope I've given you a few ideas for trading soybeans and wheat as the year draws to a close. Please call me with any further questions on these or any other markets you may have.

Carol Hurley is a Senior Market Strategist with Lind Plus, Lind-Waldock's broker-assisted division. She can be reached at 866-790-4371 or via email at churley@lind-waldock.com.

You can hear market commentary from Lind-Waldock market strategists through our weekly Lind Plus Markets on the Move webinars, as well as online seminars on other topics of interest to traders. These interactive, live webinars are free to attend. Go to www.lind-waldock.com/events to sign up. Lind-Waldock also offers other educational resources to help your learn more about futures trading, including free simulated trading. Visit www.lind-waldock.com.

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