Sep 17, 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.
 

How Much More Negative News?

Sep 17, 2014

Good Morning! Paul Georgy with the early morning commentary for September 17, 2014 at 5:30 am.

Grain futures are quietly mixed as soybeans get support from soyoil.

Traders Focus: FOMC Meeting results, Export sales on Thursday, early harvest results, Russian sanctions and chart support and resistance.

South American Weather, Grain Stocks, and Small Grains Summary are topics that will be discussed on Tuesday, September 23rd at 8:00 PM CDT at the September Allendale Ag leaders Webinar, Sign up Now!

Investors will be watching the outcome on Wednesday’ FOMC meeting for clues on the timing of the first U.S. rate hike in more than eight years. They do not expect rates to rise until 2015, but recently strong U.S. economic data has led Fed officials to acknowledge they may need to act sooner.

ABARES lowered Australian wheat export estimate for 2014/15 by 3 percent to 18.102 million tonnes, having pegged sales at 18.66 million tonnes in June.

Processors in Argentina are struggling to buy soybeans going into the time of year where meal exports pickup. With inflation running rampant, farmers are hoarding soybeans.

Scotland will vote tomorrow for independence. The outcome could have major impact on their economy.

Update - Morning Video Commentary:

 

The California Public Employees’ Retirement System said it would shed its entire $4 billion investment in hedge funds over the next year in an effort to simplify its assets and reduce costs. This retreat could prompt other cities and states to consider similar moves.

House leaders are indicating that the House is likely to vote today on a continuing spending resolution to keep the U.S. government funded until December 11, 2014, after the November election.

Watch the monthly chart of the US Dollar Index, a close above long-term resistance at 84.50 could open the door for a sharp rally. Dollar strength usually is negative for commodities.

More early harvest yield reports are coming in much better than expected; Southern IN 220 bu/ac and East-central IN 266 bu/ac dry which were well above APH. Soybean yields are equally surprising in Southern IN and IL.

Australia raised its forecast for 2014/15 beef exports by 1 percent as continued dry conditions force farmers to slaughter animals at a soaring pace, and said the United States was set to emerge as the biggest customer.

Cattle on Feed report Friday: total Cattle on Feed as of September 1 is expected to be 2.6% under last year. August Placements are expected to be 5.2% lower than last year. This would be the lowest August placement since the history of the current data series (1996). The Marketing total could be 1.1% lower than August 2013.

Packers are not bidding yet for cattle as their margins have dropped into the red. Beef values are under pressure with choice down 1.38 and select down .32. The CME Feeder Index is 230.05.

Allendale projects a 535 million lb. total pork stock level for the end of August. The five year average is 499 million lbs. for the end of August. Lean hog futures are in a trading range. Pork cutout values are up 1.90.

Markets as of 5:30 AM CDT                                                                    

  • Dec Corn   -1 1/2    
  • Nov Beans   +3 1/4
  • Dec Wheat   -1 1/4
  • Oct Cattle  +1.20
  • Oct Hogs    +.72
  • Dec Dlr     -.02
  • Dec S&P     +.50
  • Oct Crude   +.06
  • Oct Gold   +1.70

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

Traders Look to Outside Markets For Reason To Rally

Sep 16, 2014

Good Morning! Paul Georgy with the early morning commentary for September 16, 2014 at 4:30 am.

Grain futures are higher on short covering on FSA insurance acre data.

Traders Focus: The FSA insurance acres update for September, FOMC meeting and US and South American weather.

FSA Insurance acres are typically 96.5% of total acres planted to corn and 99% of total acre planted to soybeans. Traders will use the numbers released today to calculate whether USDA/NASS planted acreage estimate is in line and what could be expected on the October Supply and Demand Report.

US weather forecast has given much of the Midwest mostly dry conditions through the end of September. This will help maturity and quality. The next chance of frost doesn’t come until early October. Allendale’s weather comments.

South American weather starts to come into play as planting season begins. Argentina is expecting 10 days of clear weather which is expected to benefit the wheat crop. Brazil is looking for drier conditions as planting season officially started on Monday.

Update - Morning Coffee Commentary:

 

Crop Conditions report showed corn remaining at 74% good/excellent the 6th highest out of the last 28 years with 82% dented verses 85% average. Soybeans were unchanged at 72% good/excellent which remains at the 3rd highest out of the last 28 years.

Russia is on track to harvest the largest crop in six years, says agriculture consultancy SovEcon. They project Russia will produce 104-106 million tonnes up from 98 million due to favorable weather. Russia is expected to become the third largest wheat exporter in 2014/15 with exports of 22.5 million tonnes.

The EU wheat export market is being shuffled this year as French wheat is poorer in quality due to rains during harvest. Germany and Poland have better quality wheat and will fill Algeria’s needs.

The spring wheat cash market has been raising premiums for high protein. The rains across ND and Canada have made it very difficult for producers to finish harvesting what has looked to be a bumper wheat crop. The 15% protein wheat is hard to find and premiums have jumped to $6.00 per bushel.

NOPA crush data showed soybeans processed at 110.6 million bushel during August which was less than the trade average of 111.6 million bushel. Soybean oil stocks were very low at 1.214 million pounds.

Traders are waiting for the FOMC meeting results on Wednesday. Expectations are the Fed will reduce QE3 by another 10 billion to only 15 billion per month. The G-20 Finance Ministers will meet for 4 days starting on Wednesday.

Most analysts forecast Brazilian economic growth to remain sluggish in 2015 but pork production and exports are forecast by the USDA to rise by five and 21 per cent, respectively.

Hog carcass weights declined 1 pound from the previous week and now stand at 8 pounds heavier than a year ago. The positive is that hog producers are trending toward becoming current as hog numbers begin to increase. Pork cutout values improved on Monday by 2.28.

Cattle futures remain at a discount to cash and are struggling with a negative weekly close last Friday in the nearby October contract. Early cash calls for this week are steady lower. Showlists are up 14,000 head from a week ago. Beef values are weak with choice down .91 and select down 1.26. The CME Feeder Index is 230.04.

Markets as of 4:30 AM CDT                                                                    

  • Dec Corn   +4 1/2    
  • Nov Beans   +5 3/4
  • Dec Wheat   +6 1/4
  • Oct Cattle  -.25
  • Oct Hogs    -.07
  • Dec Dlr     -.02
  • Dec S&P     -2.00
  • Oct Crude   -.06
  • Oct Gold   +4.50

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

Frost Threat Passes With Light Damage

Sep 15, 2014

Good Morning! Paul Georgy with the early morning commentary for September 15, 2014 at 5:30 am.

Grain futures are lower as weekend frost damage was limited and a stronger dollar weighs on investor attitude.

Traders Focus for this week: NOPA crush report, FSA acreage data is due out this week, stocks report on the 30th and frost damage reports and pictures will circulate on social media.

Frost was isolated and did not do much damage to the record corn and soybean crop. The weather models are absent of frost now through the end of the month.

Great call Ryan Martin, Allendale’s meteorologist on frost coverage this past weekend. Stay in touch with Ryan’s forecast at www.Allendale-inc.com.

NOPA crush will be released at 11:00 am today; the trade average estimate is 111.6 million bushels with oil stocks at 1.352 the lowest since 2005.

The FSA acreage numbers is due out on Tuesday. This data could be viewed as friendly mostly due to all states have not reported acres. Be on the lookout for headline traders using this report as reason to cover some shorts.

The CFTC Commitments of Traders report showed managed money funds adding to long corn positions by 1,350 contracts last week. They sold an additional 14,212 contracts in soybeans and 13,372 contracts in soymeal. They sold 10,026 contracts of wheat to raise total short positions to 61,886 contracts.

Safras estimates 2015 Brazil soy crop at 95.9 mmt vs. 94 USDA and 86.7 mmt this year.

Early thoughts for crop conditions this afternoon is lower as crops near harvest.

Update - Morning Coffee Commentary:

 

U.S. crude oil futures are under pressure over concerns that new sanctions against Russia will weaken oil demand amid ample supplies and a strong dollar.

Lean hog futures have seen considerable volatility last week as spread traders were very active. Pork product demand at the retail level improved as prices were competitive and as they prepare for "Pork Month." However, we have to be concerned this pre-featuring push may be coming to an end. Pork cutout ended Friday down .96.

Cattle futures closed the week lower in the October contract which confirmed a double top on the charts. Futures traders will be looking to cash trade for support. Beef values are lower with choice down 1.61 and select down 1.81. The CME Feeder index is 227.74. Look for livestock futures to open steady lower this morning.

Markets as of 5:30 AM CDT                                                                    

  • Dec Corn   -1 3/4    
  • Nov Beans   -3
  • Dec Wheat   -5
  • Oct Cattle  Steady-Lower
  • Oct Hogs    Steady-Lower
  • Dec Dlr     +.10
  • Dec S&P     -3.25
  • Oct Crude   -.76
  • Oct Gold   +4.00

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

Can Frost Put Bears To Sleep?

Sep 12, 2014

Good Morning! Paul Georgy with the early morning commentary for September 12, 2014 at 5:30 am.

Grain futures are mixed on short covering and waiting for official low temperature reports.

Traders Focus for today: Trade analysis of yesterday’s USDA Report, temperature reports from western cornbelt and social media’s pictures of crop damage.

Hat’s off! To the farmers that participated in the Allendale Yield Survey and the staff that compiled and processed the data. The USDA's result for corn yield was 171.7 bushels per acre (bpa) and the Allendale estimate was 171.9 bpa. USDA's Soybean yield was 46.6 bpa and the Allendale survey September estimate was 46.4 bpa. Thanks to all for an outstanding job.

Daily technical chart for October Hogs. Click for larger view.

Get all the weather info you need by checking with Ryan Martin’s comments at www.Allendale-Inc.com.The weather forecast is for late October temps to move across the northern Midwest over the next 48 hours. We should be seeing the coldest temps over the next hour. Expect to see pictures on social media reporting damage from frost. Will the damage be widespread enough to activate an extended rally in corn and soybeans?

The major take away from yesterday’s supply and demand report is that it is likely the USDA will increase yields and production into the January 2015 report.

Harvest reports from customers: Lee County IA producer first field on sand averaged 200 and another producer on first field harvested 220. Most corn yields are running 20 to 40 above average.

Moultrie County IL harvested 251 acres that average 220 dry. Producer was a little disappointed with the results.
Soybean harvest in Central IN has resulted in 75 to 80 bpa which is well above normal.

Algeria bought 400,000 tonnes of EU origin wheat and France has bought 100,000 tonnes of milling from Germany.

Update - Morning Coffee Commentary:

 

Cash cattle are establishing trade at steady prices with last week. Futures trader’s ideas of $2.00 to $3.00 higher are now waning. Beef values continue to find resistance as wholesalers have inventory to clean up and retailers do not want extra inventory at current prices. Choice beef was up .08 and select down 1.83. The CME Feeder Index is 226.98.

Chart watchers should be aware of the potential double top in October cattle which a weak weekly close could accelerate selling pressure.

Lean hog futures had spreaders trading volume impact prices again on Thursday. Hog supplies are trending higher with weights still running 10 to 12 pounds above a year ago. Pork cutout values are up 1.38. High prices of competitive meats are supporting pork at the retail counter. Grocery stores are also accumulating pork in preparation for October "Pork Month".

Markets as of 5:30 AM CDT                                                                    

  • Dec Corn   - 3/4     
  • Nov Beans   +3
  • Dec Wheat   -4 3/4
  • Oct Cattle  -.02
  • Oct Hogs    -1.10
  • Dec Dlr     -.02
  • Dec S&P     -.25
  • Oct Crude   +.50
  • Oct Gold   -1.30

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

Can Grains Rally After The Report?

Sep 11, 2014

Good Morning! Paul Georgy with the early morning commentary for September 11, 2014 at 5:30 am.

Grain futures are lower as traders prepare for a bearish report. Results from today’s USDA Supply and Demand report are available here.

Traders Focus for today: Export sale data at 7:30am, USDA Supply and Demand report at 11:00 am with an eye on yield and old crop ending stocks. After the report the focus will switch to frost fears over the next 3 days.

Trade estimates for weekly export sales last week: wheat 250,000 to 450,000 mt, corn 450,000 to 650,000 mt, soybeans 750,000 to 1,000,000 mt, soymeal 100,000 to 200,000 mt and soyoil 0 to 20,000 mt.

Update - Morning Coffee Commentary

 

The weather forecast and actual temps will determine yield loss and play into market action shortly after the USDA report. Make sure to read Allendale’s Meteorologist Ryan Martin’s Blog this morning and listen to his audio broadcast at midday to stay in touch with weather probabilities.

Our Friends at World Weather Inc. have the following thoughts: The surge of cold expected in the Canadian Prairies, northern Plains and upper Midwest Thursday into Sunday will result in widespread freezes in in Canada. Most of the crop damaging cold will only affect areas outside of key grain and oilseed areas in the U.S. Midwest. Very few corn or soybean production areas will be threatened by temperatures near or below 28 degrees Fahrenheit and that should minimize the potential for production losses.

A study performed by Allendale’s Research suggests the USDA will not give us the full yield increase on the September report and use this report as a stepping stone to the final number in January.

Trade Average guess:

                      Corn                  Soybeans                                                                          

            Production     Yield     Production    Yield

Avg estimate    14.288     170.7          3.883     46.2

U.S. ending stocks     2013/14               

                    Corn     Soy       

Avg estimate       1.191   0.136  

U.S. ending stocks   2014/15     

              Wheat        Corn         Soy

Avg estimate  0.667       2.012       0.453

We'll have a full analyis  of the report after it's release at 11:00 am CDT. 

An observation which you must be aware of is that the grain markets are oversold technically and market psychology is bearish going into an expected bearish report. Will the concern over frost give us enough reason for a short covering rally? Talk to your Allendale Brokers about strategies to protect hedges.

Chinese soybean crush margins are running at a 2 year low while US crushers are profitable and are looking for soybeans to fill the gap before harvest.

Ethanol production last week averaged 927,000 bpd vs 921,000 bpd the previous week. Cheap corn and strong crush margins drive processor incentive to produce more ethanol.

The Rosario exchange estimated farmers in Argentina plant 3.7 million hectares (9.1 million acres) of corn, down 700,000 or 16 % from the 2013/14 season due to high inflation pushing up production costs.

Light cattle trade in cash market at steady with last week. Cutout values have not kept up with fed cattle values putting packer margins at near breakeven. Tight supplies in feedlots are the driver and should provide support to nearby futures. Beef values are mixed with choice up .38 and select down .50. The CME Feeder Index is 226.38.

Spreaders dominated the trading volume in the lean hog futures on Wednesday. It was thought to have been liquidation of bear spreads by a few large players which drove deferred contracts to near limit down. Hog supplies should trend higher into fall with weights still running 10 to 12 pounds above a year ago. Pork cutout values are up .87.

Markets as of 5:30 AM CDT                                                                    

  • Dec Corn   -1 3/4    
  • Nov Beans   -3 3/6
  • Dec Wheat   -3 1/4
  • Oct Cattle  -.30
  • Oct Hogs    -.07
  • Dec Dlr     -.04
  • Dec S&P     -3.50
  • Oct Crude   -.60
  • Oct Gold   +.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

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