Jul 30, 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.
 

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

Quiet Before The Next Storm

Jul 25, 2014

Good Morning! Paul Georgy with early morning comments for July 25, 2014 at 5:30 am CDT.

Grain futures are mostly lower in a quiet overnight session. The potential size of this year’s corn and soybean harvest is keeping traders bearish.

Spring wheat crop tour sees US 2014 spring wheat yield at 48.6 bushels per acre verses a year-ago of 44.9 bushels per acre, prior five-year tour average was 44.7 bushels per acre.

8:00 AM Update:

 

White House adviser John Podesta has indicated the administration plans to raise the amount of ethanol and other biofuels that must be blended into the nation’s fuel supply, Sen. Al Franken (D-Minn.) said Thursday.

The U.S. House Republicans are weighing changes to the federal biofuel mandate, but serious efforts to overhaul the renewable fuel program will likely wait until next year.

China now wants imports of U.S. distiller’s dried grains, a livestock feed, to carry certification they do not contain the MIR 162 GMO strain, according to letters from trade groups seen by Reuters, after it had earlier halted import permits.

Western European wheat farmers are holding back grain in an attempt to fight low prices.

Dry weather is likely to persist across eastern Australia for the next three months, the Bureau of Meteorology (BOM) said on Thursday, exacerbating stress on cattle and adding to concerns that wheat yields could suffer in the world’s third largest exporter.

China’s protein and corn demand has decreased during the last quarter due to their smaller hog herd. China’s sow herd has dropped 8.2% in the past year (4 million sows) and market inventory down 4.8% (21 million hogs). About 1.5 million sows of the 4 million sows were taken out in April through May period.

New-home sales fell in June and May’s reading was revised significantly lower, signs that the U.S. housing recovery is failing to build momentum heading into the second-half of the year.

Remember it is not too late to get this information from the Allendale Ag Leaders "Summer Update" Conference. These Presentations were recorded and are available by clicking here.

The USDA July 1 Cattle on Feed report will be released this afternoon.

Wall Street Journal survey:

                    Average          Range

                    of estimates     of estimates

On-feed Jul 1       98.2             97.2- 99.2

Placed in Jun       95.6             91.9- 103.5

Marketed in Jun     98.1             97.0- 100.4

Placements are expected to decline again when compared to last year due to lush pastures and short supplies of feeder cattle.

The US consumer is showing they have a strong preference for beef and they are willing to pay for it. Cash cattle have put in a strong performance this week as retailers buy product and prepare for first of month demand. Beef values are up sharply with choice up 2.97 and select up 4.13. The CME Feeder index is 212.98.

The August Lean Hog contract is a tough one to figure out as it expires on the 14th and currently a 9.00 discount to the CME hog index. Yesterday’s conference Rich Nelson suggested possible price retracements for lean hogs could move to $125 for August, $104 for October, and $92 for December. Pork cutout values are down 1.29.

Markets as of 5:30 AM CDT          

  • Sep Corn   -1 2/4
  • Aug Beans   +4 3/4
  • Sep Wheat   +2
  • Aug Cattle  +.47
  • Aug Hogs    -.30
  • Sep Dlr     +.06
  • Sep S&P     -4.00
  • Sep Crude   +.00
  • Aug Gold   +3.80

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

Allendale Releases Corn Yield Estimate

Jul 24, 2014

Good Morning! Paul Georgy with early morning comments for July 24, 2014 at 5:30 am CDT.

Grain futures are higher as old crop soybeans lead the charge due to tight supplies and firm farmer holding. Corn and wheat are tagging along for the ride.

Rich Nelson releases Allendale’s estimate for US corn yield at 174.1 bushel per acre. He said "Our belief is that the trade is not trading a number this high." Talk to your Allendale Broker to get the strategies released at yesterday’s meeting.

The first 2 sessions have been well attended by traders and producers from all around the world. Remember it is not too late to get this information. The presentations were recorded and are available by clicking here.

8:00 AM Update - Morning Coffee Commentary:

The final session of Allendale’s Ag Leaders Conference "Summer Update" will start at 2:00 pm TODAY. Signup now!

Weekly export sale will be released at 7:30. Reuter’s survey estimates are:

              Trade estimates for      Trade estimates for

              2013-14                  2014-15:

Wheat         0                        350,000-550,000

Corn          300,000-500,000          400,000-600,000

Soybeans      150,000-250,000          1,200,000-1,450,000

Soymeal       50,000-150,000           150,000-250,000

Soyoil        0-20,000                 0-10,000

Ethanol production continues at an aggressive pace because of profitable crush. Last week ethanol production was 959,000 thousand barrels compared to previous week of 943,000.

Egypt had been tendering for wheat which they bought the cheapest priced from the Black Sea Region.

August grain options expire on Friday July, 25.

Cash grain bids were steady-lower on Wednesday with limited farmer selling. We are hearing farmers are taking the deferred pricing option (DP) which usually is not a bullish sign.

Scott O’Malia, a CFTC Commissioner announced on Monday he would leave his post on Aug. 8. The International Swaps and Derivatives Association (ISDA) said yesterday that he would become the trade group’s next chief executive officer on Aug. 18.

October live cattle put in a hook reversal on the charts, Wednesday. However the strong cash market is providing support and a retest of yesterday’s highs overnight. Technical support is the 20 day moving average of 154.30. August futures contract should be well supported as cash trade this week could be several dollars higher than a week ago. The USDA July 1 Cattle on Feed report will be released on Friday afternoon.

Wall Street Journal survey:  

                    Average           Range

                    of estimates      of estimates

On-feed Jul 1       98.2              97.2- 99.2

Placed in Jun       95.6              91.9- 103.5

Marketed in Jun     98.1              97.0- 100.4

Beef values are mixed with choice down .21 and select was up 2.92. The CME Feeder index is 210.64.

Lean hog futures took a tumble yesterday. Market ready hog supplies are tight but not as tight as many traders thought. Hog carcass weights are 10 pounds heavier than last year which is making up for the numbers decline. The technical picture has turned weak and a close above Monday’s low of 111.15 in the October contract is needed to keep the uptrend intact. Pork cutout values are down 1.24.

Markets as of 5:30 AM CDT          

  • Sep Corn   +2 1/2
  • Aug Beans   +14 1/4
  • Sep Wheat   +5 3/4
  • Aug Cattle  +1.87   
  • Aug Hogs    -.75
  • Sep Dlr     -.04
  • Sep S&P     +2.00
  • Sep Crude   -.33
  • 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

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