Jul 12, 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.
 

Update-USDA Surprises Trade in Supply-Demand

Jul 11, 2014

 

 

 

WASDE Video Commentary

 

Full Analysis of the July 11th USDA Report

Corn

July-14-WASDE-US-World-corn

Old Crop Corn: The real changes made to the corn balance sheet came from old crop. USDA raised its estimate of ending stocks (August 30, 2014) up from 1.146 billion last month to now 1.246. This was just over the trade’s estimate of 1.232. We knew they would be raising old crop due to the bigger than expected stocks count from the June Grain Stocks report. USDA lowered feed/residual by 125 million and raising corn for ethanol by 25 million.

New Crop Corn: The bearish sentiment from the new crop numbers is mostly due to the increase in old crop. This was carried over into the new crop numbers in the beginning stocks category. New crop production was actually lowered by 75 million due to the June 30 Planted Acreage report. You may remember that report actually lowered their harvested estimate. No change to USDA’s 165.3 bpa yield was made. The trade, and certainly Allendale, feels we are actually running higher than that. The only demand change was a 50 million bushel drop in feed/residual. New crop stocks were raised from 1.726 billion last month to now 1.801. This was just over the 1.774 average guess. The trade is pricing corn under the assumption of a yield increase on the August report.

World Numbers: Old crop ending stocks were raised from last month’s 169.1 million tonnes to now 173.4. New crop was increased from 182.7 mt to now 188.1. Aside from changes from the US, USDA raised Canada’s crop by a small amount and the Chinese crop by 2 mt to now 222.

Soybeans

July-14-WASDE-US-World-Beans

Old Crop Soybeans: Based on the finding of more stocks in the June Grain Stocks report USDA raised its August 30 ending stock estimate today. The move, from 125 million last month to now 140, was bigger than the 128 guess. Note that USDA did raise crush and exports by 45 million today. To make their numbers work they brought seed/feed/residual down by 65 million bushels and imports by 5. Don’t forget that USDA will make these numbers work even better with a revision of the fall 2013 harvest. That will be shown on the upcoming September 30 Grain Stocks report.

New Crop Soybeans: The big jump in new crop stocks, from 325 million last month to now 415 was largely expected (418 average guess). USDA added that big acreage change from the June 30 Planted Acreage report. No change was made for yield. The trade is not as sure on soybean yields as they are for corn. The big jump in supply from higher production and higher beginning stocks was partially offset by a 90 million bushel increase for crush and exports.

World Numbers: Old crop world stocks were increased slightly, from 67.17 million tonnes to 67.24. New crop was increased from 82.9 mt to now 95.3. The only other changes, aside from higher US numbers, was 1 million increase for Chinese imports that was offset by 1 million increase for domestic use.

Wheat

July-14-WASDE-US-World-Wheat

Old Crop Wheat: The old crop marketing year ended on May 31. This report simply adjusted the stocks to the June physical count in the Grain Stocks report. Stocks declined from 593 million bushels to now 590.

New Crop Wheat: USDA surprised the trade by increasing new crop stocks from last month’s 574 million to now 660. The trade was looking at 591. Acreage was increased due to the June survey. Production was increased by 50 million bushels. The winter wheat harvest was adjusted down from 1.381 billion last month to now 1.367. Increases were made for spring wheat and durum. Along with higher production USDA lowered usage by 40 million from feed/residual and exports.

World Numbers: New crop ending stocks were raised from 188.6 million tonnes to now 189.5. There were active changes in other areas with increases for the crops in Australia, Brazil, and Ukraine and decreases for Canada and Kazakhstan.

For more information on today's report, give us a call at 800-262-7538

What will be market focus after Eleven O’clock?

Jul 11, 2014

 Good Morning! Paul Georgy with early morning comments for July 11, 2014at 5:30 am CDT.

Grain futures are slightly higher on short covering and position adjusting ahead of the USDA Report.

Allendale’s Ag Leaders Conference "Summer Update" will be presented in less than 2 weeks. Get our newest weather outlook, grain and livestock price projections, trade strategies and complete fundamental analysis. Reserve your spot here.

8:00 AM Update - Morning Coffee Commentary:

For ending stocks estimates for todays report, check out of July USDA WASDE page. It will also be updated after 11:00 AM CDT with report results and analysis.

Allendale thinks the adjustments on today’s Supply and Demand report for old corn could come in feed use, ethanol use and exports with a net increase in Ending Stocks.

New crop corn will likely see adjustments in planted acres, harvested acres and possibly yield. The USDA is less likely to change soybean yields on the July report as they have made adjustments only one time out of the last 28 years.

Ending stocks for new crop soybeans could reach 400 million bushels, more than 3 time current year ending stocks.

Old crop soybeans are being watched closely on how the USDA will handle the stocks situation due to actual export sales and domestic crush usage already above previous targets.

Cash cattle traded $1 to $2 lower so far this week. The break in futures has given the packers the upper hand.

August cattle futures broke the 20 day moving average but should find support at the $148 level. Beef values remain firm with choice up 1.60 and select up 1.26. The CME feeder Index is 214.82.

Lean hog futures continue to see some profit taking and liquidation by funds. Pork cutout values were down .62.

Markets as of 5:30 AM CDT          

  • Sep Corn   +1       
  • Aug Beans   +5
  • Sep Wheat   + 1/4
  • Aug Cattle  -.05    
  • Aug Hogs    -.42
  • Sep Dlr     -.04
  • Sep S&P     +3.75
  • Aug Crude   -.38
  • Aug Gold   -1.50

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

What will USDA Adjust on Supply and Demand Report?

Jul 10, 2014

 Good Morning! Paul Georgy with early morning comments for July 10, 2014 at 5:15 am CDT.

Grain futures are higher as short-covering ahead of reports ttys to relieve the oversold condition.

Allendale’s Ag Leaders Conference "Summer Update" will be presented in less than 2 weeks. Get answers on the following topics: Temperature and Precipitation Outlook through Crop Maturity. US Harvest Weather outlook, what is the potential for Early Frost? Where is El Nino? South American Planting Weather Outlook and an update on price directions for grains and livestock markets.

The weather session takes place July 22nd at 2:00 PM CDT. The series will continue July 23rd and 24th at 2:00 pm with our grain and livestock outlooks. All sessions will be recorded for your viewing convenience.

Below normal temperatures during pollination has historically produced big corn yields. The production years of 2004 and 2009 were years where cool temps produced yields well above trend. Traders expect USDA to raise yield on average to 166.1 per acre. However, history suggests USDA is very reluctant to change yields from June to July. They have only changed yields 3 times since 1990.

Allendale thinks the standout adjustments on Friday’s Supply and Demand report for old corn could come in feed use, ethanol use and exports with a net increase in Ending Stocks. New crop corn will likely see adjustments in planted acres, harvested acres and possibly yield.

The USDA is less likely to change soybean yields on the July report as they have made adjustments only one time out of the last 28 years. Ending stocks for new crop soybeans could reach 400 million bushels, more than 3 time current year ending stocks.

Old crop soybeans are being watched closely on how the USDA will handle the stocks situation due to actual export sales and domestic crush usage already above previous targets.

The Weekly export sales will be released at 7:30 this morning. Trade estimates from Reuters are:

                                  2013-14                 2014-15:

Wheat                            0                      400,000-635,000

Corn                 225,000-400,000          375,000-650,000

Soybeans         -100,000-100,000        300,000-500,000

Soymeal            30,000-150,000             0-125,000

Soyoil                  0-20,000                         0-10,000

There is more talk circulating that China is offering to resell beans out of Brazil. Also concerns that as many as 4 cargoes have reach china and buyers were unable to produce a letter of credit.

Last trading day for the July grain contracts is Monday.

CONAB in Brazil once again raised their old crop corn production estimate a bit to 78.2 mmt, up 300K while the USDA is still using 76 mmt.

Index Funds continue to roll out of the August contracts pressuring cattle futures already a discount to cash. The nearby cattle closed below key moving average support and posted a reversal day on the charts. This action will likely give packers a reason to hold out as long as they can before buying, especially with an increase in showlist numbers. Beef values were mixed with choice up .59 and select down .36. The CME feeder Index is 214.09.

Spreaders are providing volatility in the pork complex. Trade analysts are looking for hog supplies to get extremely tight over the next 60 days as it is the time where PEDv should have the greatest effect. We expect to see very choppy markets in livestock futures during this period. Pork cutout values are up 1.05.

Markets as of 5:15 AM CDT          

  • Sep Corn   +1       
  • Aug Beans   +9
  • Sep Wheat   +2 3/4
  • Aug Cattle  +.40    
  • Aug Hogs    -.32
  • Sep Dlr     +.07
  • Sep S&P     -16.00
  • Aug Crude   -.66
  • Aug Gold   +19.10

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

Spreads Dominate Volume Ahead of WASDE

Jul 09, 2014

 Good Morning! Paul Georgy with early morning comments for July 9, 2014 at 5:30 am CDT.

Grain futures are lower as traders wait for USDA reports.

Cash bids firm up slightly due to lack of farmer selling. The sell-off in futures has farmers waiting for a bounce to clean out bins for the new crop grain. However, weather forecasts are not providing any friendly bias. The cool temps and plenty of moisture is ideal for corn pollination.

Trade average estimates for Fridays report are adding more corn and soybeans to the ending stocks. Call your Allendale Broker and ask for the 2009 corn chart, it may be giving us a road map for price movement during a big crop year.

Sign up Today for the Allendale Ag Leaders "Summer Outlook Conference", Click HERE.

Reports out of the FSU are suggesting wheat yields in the south of Russia were 18% higher than last year. Kazakhstan wheat production is expected to rise due to good weather conditions.

FOMC meeting minutes released today will be scrutinized for any hints on the timing of the Fed’s first rate hike.

The new May beef trade numbers were disappointing. Beef exports ran 4% over last year. While that is still a very good pace, it is a slower pace than the 5% and 15% increase posted in the previous two months. Beef imports were very strong at 20% over last year. Beef cutout values were firmer on Tuesday as Choice was up 1.80 and select was up 1.39. The CME Feeder Index is 213.85.

Hog markets have some slightly negative news to digest. The May US pork exports totaled 430.836 million lbs. That was almost equal to last year and below the previous two months which showed gains of 22% and 10% respectively over the previous year. Imports were also disappointing as they ran 15% over last year in May. Pork cutout values were down .19.

Markets as of 5:30 AM CDT          

  • Sep Corn   -2       
  • Aug Beans   -12 1/2
  • Sep Wheat   -2
  • Aug Cattle  +.42    
  • Aug Hogs    +.25
  • Sep Dlr     +.01
  • Sep S&P     +.50
  • Aug Crude   +.00
  • Aug Gold   +8.50

 

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

Old Crop Bean Demand In Spotlight Again

Jul 08, 2014

Good Morning! Paul Georgy with early morning comments for July 8, 2014at 4:45 am CDT.

Grain futures are mixed with corn and wheat are higher on bargain hunting; soybeans are lower.

The forecast for temperatures to be below average for the next 10 days throughout the Midwest sets the stage for excellent pollination conditions. If the forecast comes true it would make it the fourth coolest pollination period since 1980. This would put this year in the category with 2004 and 2009 when record yields were set in corn.

Crop ratings for corn are 75% good/excellent which is the 5th best in the last 28 years.

Soybean ratings came in at 72% good/excellent which out of the last 28 years there was only 1 year that had a higher rating during this week.

Winter wheat harvest advances 14% to 57% complete versus 60% average. Spring wheat ratings were steady with last week at 70% good/excellent. Pasture and range conditions were down 2% to 56% good/excellent compared to 49% last year.

The Goldman Index Roll out of the August contracts begins today.

Yesterday funds sold 9,000 wheat, 11,000 corn and 3,000 bean contracts.

Demand bulls are getting concerned as there is more talk of China trying to resell several cargoes of soybeans out of Brazil and one load out of the US gulf. Also there are reports that South Korea bought 60,000 tonnes of soymeal from South America with a Chinese origin option.

USDA Supply and Demand Report on Friday should put the final touches to old crop ending stock picture for soybeans. The corn balance sheet has the potential for a lot of adjusting but ultimately finishing with higher ending stocks than last month.

The economics calendar is light this week as the Dow is testing all-time highs of 17,000. US Consumer Credit is expected to show a big increase on today’s report.

Lean hog futures are being driving by the strength in product. Pork cutout values were up another .32 to 134.52. Even with tight hog supplies packer margins have improved to over $91.00 per head. Look for profit taking to provide setbacks in futures as cash hog supplies from now through September should be the tightest of the season.

Live cattle futures are being watched as yesterday’s sharp rally and then a sell-off could be construed as a reversal. However cash trade is expected to be steady to higher this week with a possible 160 trade. Product values are firm as retailers restock shelves after the holiday. Choice was up .06 and select up .11 on Monday. The CME Feeder Index is 214.58.

Markets as of 4:45 AM CDT          

  • Sep Corn   +1 1/2   
  • Aug Beans   -3 1/4
  • Sep Wheat   +4     
  • Aug Cattle  +.30    
  • Aug Hogs    +.07
  • Sep Dlr     +.05
  • Sep S&P     -2.75
  • Aug Crude   -.15
  • Aug 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

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