Aug 1, 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.
 

Can A New Month Change The Bearish Attitude?

Aug 01, 2014

 Good Morning! Paul Georgy with the early morning commentary for August 1, 2014 at 5:30 am CDT.

Grain futures are mixed with corn and soybeans lower and wheat higher. Index futures are showing a lower start for stocks this morning.

Update - Morning Coffee Commentary:

Corn closed out July with a 15% decline and the third straight monthly lower close. Traders are becoming convinced that USDA will raise yields on the August 12 report. Our study suggests the USDA will not give us the highest national yield until January.

Weather forecasts still remain the focus of row crop traders because a rain next week could be a "million dollar rain" for producers. One more good rain could be all the crop needs to make it to maturity.

In conversations with producers and elevators we are hearing a lot of corn moving off the farm on basis contracts or DP. Elevator managers are concerned about readying their facility for the bumper harvest. They would like to clean out their facilities before harvest.

Rail freight rates are high if you can get the railcars. Storage issues could make this year’s harvest a struggle for the producer.

The U.S. Environmental Agency on Thursday extended the deadline for refiners to show compliance with 2013 federal biofuel use targets under the Renewable Fuel Standard. Final targets for 2014 biofuel usage are expected to be sent to the White House within weeks, at which point the long-delayed rule will enter its final review before public release. Then the proposal will go to the White House's Office of Management and Budget which could take several weeks for a decision.

The U.S. Department of Agriculture said on Thursday it will modernize its decades-old inspection methods for poultry in an attempt to crack down on food-borne illness. They will require all poultry companies to take measures to prevent Salmonella and Campylobacter contamination.

Cattle futures were hit with the "Get Me Out NOW!" attitude on Thursday prompted by investor selling in the stock market and other commodities. Traders are waiting for the cash trade to develop this week. Lower futures are giving packers the incentive to reduce bids.

Feeders as the leaders will be watched closely because of the key reversal yesterday on the charts. They were limit down close after setting a new all-time high.

Beef values were mixed with choice up .74 and select down .23. The CME Feeder Index is 225.06. Call your Allendale Broker for strategies available in the cattle complex.

Lean hog futures tried rallying yesterday on oversold conditions and cattle/hog spread unwinding. However, Oct lean hog contract has closed lower 11 out of the last 12 trading session. Pork cutout values are down 1.20. Look for volatile markets to continue in livestock futures.

Markets as of 5:30 AM CDT          

  • Dec Corn   -1      
  • Nov Beans   -8 3/4
  • Sep Wheat   +3 1/2
  • Oct Cattle  -1.35
  • Oct Hogs    -.40
  • Sep Dlr     +.02
  • Sep S&P     -13.50
  • Sep Crude   -.79
  • Oct Gold   -3.30

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

Export Sales and Weather Forecast on Today’s Docket

Jul 31, 2014

Good Morning! Paul Georgy with the early morning commentary for July 31, 2014 at 5:30 am CDT.

Grain futures are lower as quiet markets follow the long-term trend.

The weather model runs were basically the same as yesterday. They expect rains expanding to all of cornbelt late next week.

Update - Morning Coffee Commentary:

Lack of new news is keeping grain futures in a trading range. Traders are waiting to see if it is going to rain across the cornbelt. Farmers are telling us one more good rain will put the final touches on an outstanding crop.

Ethanol production last week was 954 million barrels per day which was 5,000 barrels less than last week. Current corn usage pace is below the amount needed to meet USDA target.

Spot cash basis bids for soybeans was steady to lower at U.S. Midwest processors and elevators on Wednesday as farmers remain uninterested in selling soybean crops. Corn bids were steady with limited farmer movement.

Weekly export sales data released at 7:30 this morning: Corn exports sales estimates are 300,000 to 400,000 tonnes for 2013/14 and 500,000 to 800,000 tonnes for 2014/15.

Old-crop soybean export sales estimates range from 100,000 to 200,000 tonnes and new-crop export sales estimates range from 800,000 to 1.1 million tonnes.

Trade estimates for weekly sales of wheat are 350,000 to 550,000 tonnes.

Russia has been an aggressive competitor in the export sales of wheat, however, this may change as new sanctions put in place this week could have an impact on further sales. The sanctions will make it harder for the Russian Ag Bank to be involved in international trade.

The 2nd quarter U.S. GDP climbed 4%, which was much higher than the 3% growth rate expected. Growth in inventories contributed 1.66 percentage points. The higher than expected GDP number was a boost to the US Dollar, which makes US products more expensive on the world market.

The Federal Reserve did exactly what investors expected. It scaled back its support for the economy, while pledging to keep short term interest rates low "for a considerable time" after it stops buying bonds. The Fed reduced the QE funding by 10 billion per month to $25 billion.

Tight supplies of market ready cattle and strong retail demand equals higher prices. There is no fundamental change that says the top is in. However, the saying "All things that go up must come down" is true, but from what price? Maybe it is time to use some risk management to lock in profits. Beef values continue their run with choice up 1.52 and select up 1.80. The CME Feeder Index is 224.95.

It is difficult to point to the exact reason for the sharp sell-off in lean hog futures but several factors are influencing the move: lower cash markets, lower product values, fund liquidation, end of month margin selling and technical sell stops. Pork cutout values are down .90.

Markets as of 5:30 AM CDT          

  • Sep Corn   -2 1/4
  • Aug Beans   – 1/2
  • Sep Wheat   -2 3/4
  • Aug Cattle  -.25
  • Aug Hogs    -.85
  • Sep Dlr     +.06
  • Sep S&P     -12.50
  • Sep Crude   -.86
  • Aug Gold   -.50

 

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

Weather Forecast Controls Grain Direction

Jul 30, 2014

Good Morning! Paul Georgy with the early morning commentary for July 30, 2014 at 5:30 am CDT.

Grain futures are mostly lower with corn and soybeans weak and wheat up slightly.

Traders are looking at the charts for guidance but in reality the weather will be the major influence on markets over the next 2 weeks. Most traders believe a wide spread rain across the cornbelt sometime before the middle of August would make the corn crop and add bushels to soybean production.

Update - Morning Coffee Commentary:

Current weather forecasts are suggesting rain moving into the greater Midwest late next week with chance of rain for the northern cornbelt this weekend.

Discussion on what yield the USDA uses on the August 12 report will pick up as we approach the date. Allendale is expecting a174.1 bushels per acre average for the US.

Soybean basis fell .10 in Decatur while bids were steady at other locations. Corn basis was steady on very light trade on lack of farmer selling.

Tomorrow is first notice day for the CBOT August contracts.

German wheat harvest becomes crucial to European wheat quality. Rains that downgraded the quality of wheat in France have moved into southern Germany. Poor quality wheat in EU will compete with corn demand.

President Xi Jinping has made his strongest move to date targeting elite party corruption in China. On Tuesday, the Communist Party announced that former security chief Zhou Yongkang will be investigated on formal corruption charges.

AGCO lowered expectations for all the major farm machinery markets, ditching last hopes of a flat North American market, and forecasting a slump of up to 20% in South America, where "weak demand from sugar producers", facing increasing financial pressures from low prices, has dented demand.

Feeder cattle traders see no reason for prices to work lower (although we know there will be a setback at some time) because feedlot profits are unprecedented driving demand, pasture conditions are excellent and building the cowherd could be profitable. Bottom line is there are only a few cattle to go around. Retail demand is staying strong, beef values continue to set new highs. Choice is up 2.04 and select is up 2.86. The CME Feeder Index is 224.19.

Cash hog and futures markets are under pressure as hog supplies are increasing while packers are cutting back on hours. Pork product has finally found some strength with cutout values up .19.

Markets as of 5:30 AM CDT          

  • Sep Corn   -2 1/2
  • Aug Beans   -9
  • Sep Wheat   +1
  • Aug Cattle  +.30
  • Aug Hogs    -.87
  • Sep Dlr     +.07
  • Sep S&P     +4.00
  • Sep Crude   +.36
  • Aug Gold   +.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

Crop Conditions Down Slightly

Jul 29, 2014

Good Morning! Paul Georgy with early morning comments for July 29, 2014 at 4:30 am CDT.

Grain futures are mostly lower for a typical turnaround Tuesday.

Update - Morning Coffee Commentary:

 

Weather forecasters have pushed the rain for the western cornbelt back a few days however the second week of forecast is suggesting good rains for the cornbelt.

Crop conditions released by USDA late yesterday showed the corn crop dropping from 76% to 75% G/E. Last year we had 63% G/E and 60% in the 10 year average. The poor to very poor category was raise by 1% to 6%.

Soybean conditions fell by 2% to 71% G/E compared to 63% last year and 58% is the 10 year average. Poor to very poor was raised by 1% to 6%.

Spring wheat conditions stayed the same as last week at 70% G/E.

Export sales of soybeans to China have been very active in recent weeks. When calculating the current crush margin in China, yesterdays rally has turned it to the negative side. It is believed the improvement in China’s economy and the uncertainties of Argentina’s economic stability have sent the Chinese buyers to the US to book 2014/15 needs.

Chart analysts are suggesting the November soybeans may be headed to the gap starting at 11.29 ½.

Research suggests that USDA has a higher than normal probability of raising yield on the August report (due to be released August 12). The Reuters survey has traders estimating an average yield improvement of 5.2 bushel per acre.

Low interest rates did not help the number of existing homes under contract as it fell by 1% when Wall Street economists were predicting a .5% increase.

Mitsui’s United Grain Corp has shut its export terminal at the Port of Vancouver which is among the largest on the U.S. West Coast because of labor disputes and their inability to get ships loaded.

McDonalds in Japan is considering buying meat from Brazil since their Chinese supplier has been shut down.

Cattle markets react to USDA reports, tight supply of market ready cattle and strong retail demand. Beef values are higher again with choice up 1.92 and select up 1.84. The CME Feeder Index is 221.95. The asking prices by feedlots are expected to be higher again this week.

Cattle traders should be on the lookout for a correction especially if packers don’t pay up for cattle this week. Manage risk, call your Allendale Strategist.

The pork complex is being pulled lower by larger than expect production mostly due to heavier weights. Technical selling has weighed in on the pressure as key chart support levels are taken out. Pork cutout values are down .85.

Markets as of 4:30 AM CDT          

  • Sep Corn   -1 3/4
  • Aug Beans   -2
  • Sep Wheat   -2
  • Aug Cattle  +.17
  • Aug Hogs    -.85
  • Sep Dlr     +.01
  • Sep S&P     -1.75
  • Sep Crude   -.08
  • Aug Gold   +4.70

 

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

Rains Missed Some Areas, Forecast Drier

Jul 28, 2014

 Good Morning! Paul Georgy with early morning comments for July 28, 2014 at 5:30 am CDT.

Grain futures are higher on strong demand for new crop soybeans after the recent selloff.

8:00 AM Update - Morning Coffee Commentary:

 

The forecast for a dry spell is supporting short covering in corn and soybeans. It now looks like it will be late in the 6 to 10 day period before good moisture coverage. Check out Ryan Martin’s weather to stay on top of any changes in the forecast.

Reuters poll of analysts puts 2014 US corn yield estimate at 170.5 bushels per acre verses USDA’s last estimate of 165.3 bushels per acre.

Safras pegs 2015 Brazil soy crop at 94.5 mmt vs. USDA 91 mmt and 87.5 mmt last year.

Trader’s view on US crop ratings this afternoon for corn and beans are unchanged to higher after last week’s 76% and 73% respectively.

Russia’s ban of Ukrainian milk and milk products takes effect today.

Dry weather conditions in Russia are starting to impact the production of soybeans and sunflowers.

Australian wheat producers are becoming concerned about dryness and the development of El Nino. Producers in New South Wales and Queensland are already dealing with sporadic showers and low subsoil moisture.

Tyson Foods plans to close 3 plants in Cherokee, Iowa; Buffalo, New York; and Santa Teresa, New Mexico during first half of calendar 2015. Age of plants, renovation costs and product demand changes are cited as the reason for closure.

USDA says July 1 all Cattle on Feed were 98.0% (trade est. 98.3%), June Placed 94.0% (trade est. 96.6%), and June Marketed 98.0% (trade est. 98.0%). The Cattle on Feed is slightly supportive for today’s cattle opening. Beef values higher on Friday with choice up 1.82 and select up 1.49. The CME Feeder Index is 214.13.

Pork cutout values were up .48.

Markets as of 5:30 AM CDT          

  • Sep Corn   +2 1/2
  • Aug Beans   +6 1/4
  • Sep Wheat   -4 1/4
  • Aug Cattle  Steady-Higher
  • Aug Hogs    Steady-Higher
  • Sep Dlr     -.02
  • Sep S&P     -1.25
  • Sep Crude   -.56
  • Aug Gold   +1.60

 

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

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