Apr 25, 2014
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The Allendale Wake-Up Call

RSS By: Paul Georgy, AgWeb.com

Paul Georgy serves as president/CEO of Allendale, Inc., a worldwide agricultural advisory and research firm that provides agricultural commodity price research and risk management alternatives for producers, major food companies, international corporations, foreign governments, and major news vendors.
 

Spread Unwinding Drives Price Movement

Apr 24, 2014

 Spread Unwinding Drives Price Movement

Good Morning! Paul Georgy with early morning comments for April 24, 2014at 4:40 am.  

Grain futures are quiet with prices holding near unchanged.

We talked about spread unwinding yesterday morning which was the driver during yesterday’s session. Long positions have been building in the old crop soybeans and meal while selling corn, wheat and new crop soybeans.

Traders will have to reduce position size to 600 contracts by next Wednesday which is first notice day for May contracts.

There is more talk that 2 to 3 cargoes of Brazilian soybeans have been sold into the US. This seems like the only way for USDA to solve the balance sheet issue.

A senior member of the Sunrise group from China is reported as being in the US. Many traders believe he is here to renegotiate previously sold soybean or meal cargoes. No confirmation of this being the reason for his visit.

Stats Can is out this morning with the trade looking for canola acres to be up 1.2 million to 21.1 million acres.

The corn market is being impacted by spread unwinding and weather forecasts. Although not an unexpected forecast, the cold and wet weather for next week has many thinking corn will not get planted. We think otherwise as some of our customer believe they will have more than 50% planted by this weekend.

The possibility of rain in the western southern plains is weighing on wheat futures. Many observers are saying rain will help but they need it now, time is running out for the wheat crop.

This morning at 7:30 the USDA will release the weekly export sales numbers. Trade estimates are:

                            Trade Estimates            Trade estimates

                                  2013/14                         2014/15

Wheat               200,000-400,000             250,000-500,000

Corn                 500,000-800,000             150,000-250,000

Soybeans        -200,000-+100,000           350,000-550,000

Soymeal             25,000-125,000              50,000-100,000

Soyoil                          0-25,000                         0-10,000

This week’s cold storage report for pork has sparked reality in the minds of livestock trader. Pork supplies in storage are very tight and we haven’t seen the real effects of PEDv on cash hog supplies yet. Pork cutout values were up .32 on Wednesday.

Cattle packers are waiting as long as possible this week even with beef price improvement. Friday afternoon the USDA releases the April Cattle-on-Feed report. Choice beef is up 1.43 and select is up 1.05. The CME Feeder Index is 177.35.

Markets as of 4:40 AM

  • May Corn    + 3/4
  • May Beans   -1
  • May Wheat   – 1/2
  • Jun Cattle  +.15
  • Jun Hogs    +.25
  • Jun Dlr     -.06
  • Jun S&P     +6.50
  • Jun Crude   +.15
  • Jun Gold    -.80

 

 Chart of the Day

daily chart

If you have any questions on any of our material, give us a call at 800-262-7538 or email us at service@allendale-inc.com

What Are We Watching Today?

Apr 23, 2014

Good Morning! Paul Georgy with early morning comments for April 23, 2014 at 4:30 am.  

Grain futures are mixed in a quiet overnight session.

Spread unwinding is the feature as traders wait for new news. The several points of interest traders are focusing on include weather forecast for US planting season, export news on soybeans to China and geo-political events in Ukraine. Chartists are watching support and resistance levels which could trigger money flow reactions.

The weather forecast has added a little more moisture for Midwest and the Euro model has snow for the northern Midwest. Read Allendale Meteorologist, Ryan Martin’s weather comments for all the details.

The long soybean – short corn spreads have been a feature the last few months. In this position traders are short 2 or 3 contracts of corn for every 1 long contract of soybeans. The news of China’s soybean purchases or cancellations will impact spreaders biases.

Ukraine’s Ag Ministry says that 97% of the early spring planting has been completed which amounts to 2.55 million hectares out of an expected 2.63 million hectares.

Abiove, Brazilian soy crushing association said on Tuesday they expect exports of 43 million tonnes of soybeans, down from its forecast of 44 million tonnes due to weaker Chinese demand.

The CME announced NEW contract limits for grain contracts. "On May 1, the initial daily limit for corn will drop to 35 cents a bushel from 40 cents. The initial daily limit will rise to $1.00 from 70 cents for soybeans and drop to 45 cents a bushel from 60 cents for CBOT wheat", the notice said.

The USDA released meat in cold stage numbers yesterday. Rich Nelson, Allendale’s Chief Strategist says, "It is not often that we get shocking numbers from the monthly Cold Storage report but that was the case this time. A massive 79 million pounds drawdown was made during the month of March. This was the largest pork drawdown in all previous March findings. It was also the third single largest monthly drawdown in history (after June 2013 and May 2008)."

"USDA found 404.7 million pounds of beef stocks at the end of March. This is 21% lower than last year (end of Feb was 16% lower). The drop compared with February was 5 million lbs. (normally a 2 million increase)."

The USDA April 1 Cattle-on-Feed report will be released on Friday at 2:00 pm. Beef cutout values are higher with choice up 2.15 and select up 1.55. The CME Feeder Cattle Index is 177.13. Pork cutout values are down 2.33.

Markets as of 4:30 AM

  • May Corn    + 1/4
  • May Beans   -10 1/4
  • May Wheat   + 3/4
  • Jun Cattle  -.37
  • Jun Hogs    -.05
  • Jun Dlr     -.16
  • Jun S&P     -.50
  • Jun Crude   -.50
  • Jun Gold    +2.60

 Chart of the Day

daily chart

If you have any questions on any of our material, give us a call at 800-262-7538 or email us at service@allendale-inc.com

Will Big Money Be Buying Today?

Apr 22, 2014

Good Morning! Paul Georgy with early morning comments for April 22, 2014 at 4:30 am.  

Grain futures are higher on bargain hunting after yesterday’s sell-off.

USDA weekly crop progress report showed winter wheat good/excellent conditions stayed at 34% compared to 35% last year.

Corn planting progress was 6% complete nationally. Allendale’s research suggests we should not be worried about late planting. In the past 6 late panting years, yields exceeded trend yield projections 5 times.

Corn export inspections were 1.6 million tonnes which was above week ago levels. There were 138,777 tonnes of soybeans shipped which was about half of previous week and at the low end of trade estimates.

NOAA’s latest long-term forecast has most of the Midwest with normal temps and normal precip for May, June and July.

A $500,000 study paid for by the federal government and released Sunday in the peer-reviewed journal Nature Climate Change concludes that biofuels made with corn residue release 7 percent more greenhouse gases in the early years compared with conventional gasoline. Read comments from AP article.

Barclays is expected to announce this week a plan to rein in its presence in commodity markets. Barclays is among the leading five banks in commodities, but many lenders are shrinking their operations or forgoing the sector because of increased regulatory scrutiny.

April cattle contact is nearing expiration day with a sizable open interest. This contract could get very volatile before the last trading day on April 30. The discount of June futures to cash is providing some support however larger supplies of fed cattle should be available as we move to the end of the 2nd quarter. Cattle on Feed Report will be released on Friday. Beef values are showing a sign of improvement as choice was up 2.71 and select was up 2.84. The CME Feeder index is 177.13. Cash cattle are expected to trade steady to better this week.

Fieldwork is having its seasonal impact on hog movement in the Midwest. Packers are becoming more aggressive early in the week as market ready hog supplies are tight. Pork cutout values are down 1.92.

Poultry prices have had a sharp increase in recent weeks which has taken away some of the competitive edge at the retail counter. With cookout season on top of us, traders will be watching consumer demand very closely.

Markets as of 4:30 AM

  • May Corn    +3 1/4
  • May Beans   +4 1/2
  • May Wheat   +2 1/2
  • Jun Cattle  +.10
  • Jun Hogs    +.02
  • Jun Dlr     -.07
  • Jun S&P     -.25
  • May Crude   -.37
  • Jun Gold    +2.30

 Chart of the Day

daily chart

If you have any questions on any of our material, give us a call at 800-262-7538 or email us at service@allendale-inc.com

Great Weekend For Planting Progress

Apr 21, 2014

Good Morning! Paul Georgy with early morning comments for April 21, 2014 at 4:40 am.  

Grain futures are lower due to weather and profit taking.

The week ahead has something for everybody. Corn traders will be talking about the planting progress made this weekend. The USDA will give us the official numbers at 3:00 pm today. Trade is expecting as much as 15% planted versus 18% average.

Soybean traders will be watching for any official announcement on cancellations or switching of soybean purchases by China.  RJO’s Sao Paulo affiliate is hearing more reports of PRC soy cargoes unable to load as buyers are unable to open letters of credit which is pressuring basis as beans back up in ports.

The weather forecast for the southern plains and estimates of frost damage to the winter wheat crop will have an impact on wheat futures.

The Russia/Ukraine situation continues to intensify but so far has been a battle of words. Any further military action will have an impact on world economies. Grain markets will be very sensitive to events in the Black Sea area due the possible impact on shipping commitments.

The weekly commitment of traders report showed Managed Money funds reducing long positions in corn by 19,634 contracts. They increased long positions in soybeans by 5,285 and reduced long positions in wheat by 4,979 contracts.

On the economic front in the US we will get existing home sales on Tuesday and new home sales on Wednesday. The week ahead will also be a big week for corporate earnings reports.

The USDA announced late last week new rules for reporting of PEDv with hopes to slow the spread of the virus.

Cash hog values continue while lean hog futures rally. The trade is expecting much bigger declines in hog supplies going into the summer months. Product demand should pick up this week as retailers restock coolers for the cookout season. Pork cutout value is up 1.26.

Cattle are hoping to see some improvement in packer interest this week. Product values are mixed with choice up .47 and select down .20. The CME Feeder Index is 179.95. Livestock futures could start steady to lower.

Markets as of 4:40 AM

  • May Corn    -3 1/2
  • May Beans   -5 1/4
  • May Wheat   -13 3/4
  • Jun Cattle  Steady
  • Jun Hogs    Steady
  • Jun Dlr     -.02
  • Jun S&P     +1.75
  • May Crude   -.29
  • Jun Gold    -5.80

 Chart of the Day

daily chart

If you have any questions on any of our material, give us a call at 800-262-7538 or email us at service@allendale-inc.com

Long Weekend Could Impact Monday’s Direction

Apr 17, 2014

Good Morning! Paul Georgy with early morning comments for April 17, 2014 at 4:50 am.  

Grain futures are higher ahead of export data numbers. End-users are aggressively accumulating inventory before farmers head to the fields.

Weekly export data will be released at 7:30 this morning. Traders are focused on the soybean sales as there are already more beans sold than USDA has in the balance sheet. Traders are talking about 12 cargoes of Brazilian soybeans canceled by China and being redirected to the US. Also there is talk that 2 cargoes of soybean meal have been sold to US. No confirmations yet.

                          Trade estimates          Trade estimates
                            for 2013/14                   for 2014/15
Wheat               50,000-250,000          225,000-375,000
Corn               550,000-850,000                 0-150,000
Soybeans      -100,000-+100,000         175,000-350,000
Soymeal         100,000-200,000           50,000-100,000
Soyoil                        0-50,000                        0-10,000

Weather forecasts suggest farmers will have a chance to get in the fields next week. Several of our customers are going to start planting today and many others will be in full swing by the weekend. Traders will be watching the long-range weather forecast as they get positioned for Monday. In recent weeks Monday’s have been a buy day for funds. This Monday much of the world will be on holiday.

Without a major change in Ukraine or in the weather forecast bears might have the upper hand to start the week.

Soybean basis remains strong in the Eastern Cornbelt as processors struggle with rail shipments from the western Cornbelt. They also hope to get enough inventories before farmers go the fields.

US grain futures markets will close at regular time today and not open until Sunday night. Livestock will close at 1:55 CDT today and reopen at 9:05 on Monday morning.

Typically the trade pays little attention to USDA’s regular mid-month Livestock, Dairy, and Poultry report. This report provides a text commentary followed by tables of USDA’s big picture projections in the livestock world. This year hog analysts are trying to find any guidance to get a handle on hog supplies. USDA again suggested 2014 pork production will only run 2% lower than last year. Adjusted from a live price to a lean with premium they are projecting cash hogs from $107 to $112 in Q2, $100 – $108 in Q3, and $92 to $100 in Q4. Futures are suggesting prices will be much higher. Pork cutout values are down .57.

Given the higher tone to wholesale beef prices this week there is an undercurrent of optimism for this week’s cash cattle trade. Some are suggesting steady to firm. Beef cutout values are higher with choice up .89 and select up 1.33. The CME Feeder Index is 179.63.

Markets as of 4:50 AM

  • May Corn    +1 3/4
  • May Beans   +10 1/2
  • May Wheat   +5 1/4
  • Jun Cattle  +.00
  • Jun Hogs    -.25
  • Jun Dlr     -.22
  • Jun S&P     -3.75
  • May Crude   +.07
  • Jun Gold    +4.10

 Chart of the Day

daily chart

If you have any questions on any of our material, give us a call at 800-262-7538 or email us at service@allendale-inc.com

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