Basis Widens As Futures Consolidate
Sep 26, 2017
Good Morning! From Allendale, Inc. with the early morning commentary for September 26, 2017.
Grain markets are quiet at the CME as basis continues to widen at the elevators and processors. Northeast IA reported a record wide basis for immediate delivered corn. Many end users are indicating they can't use any more old crop corn.
Number One question that seem to be the concern of farmers is: "What should I do with my old crop corn?" especially from the northwestern quadrant of cornbelt. We suggest talking to your Allendale representative, as soon as possible.
Traders prepare for the USDA September 1, Quarterly Stocks Report and Small Grains Report on Friday at 11:00 am CDT. Bloomberg's trader survey has average corn stocks at 2.346 billion bushels, soybeans at 339 million bushel and wheat 2.203 billion bushels.
Small Grains report will focus on how the USDA will adjust wheat yields.
Weekly harvest progress came in short of trade estimates. Corn harvest is 11% complete versus trade guess of 14% and 5 year average of 16%. Soybean harvest is 10% done versus trade expectation of 11% and 5 year average of 9%. Winter Wheat plantings is moving slowly with 24% complete and 38% is the 5 year average.
Funds were estimated to have been net buyers of 3,500 corn and 3,000 wheat contracts. They were net sellers of 6,500 soybean contracts on Monday.
Beijing plans to roll out a gasoline known as 'E10' - containing 10 percent ethanol - across the world's largest car market by 2020, state media reported last week. It is estimated that China could import as much as 20 mmt of corn a year to meet the policy requirement. Reuters calculations suggests about 45 million tonnes of corn annually would be used to produce the 15 million tonnes of ethanol.
Harvest reports continue with the theme of larger than expected yields across the corn and soybean belt.
Economic market is unanimously expecting the FOMC at the conclusion of today's 2-day meeting will announce a start date for its balance sheet reduction program.
Cattle on Feed numbers shocked CME traders and pressured feeder cattle and live cattle futures yesterday. Cattle futures will have expanded limits of $4.50 and feeder cattle $6.75 today.
Feedlot showlists are estimated to be 1,800 head less than last week.
Cash cattle closed out last week on a positive note with a few cattle trading as high as 110. Thoughts are it will take until late in the week for packers to buy enough cattle. Earlier guess if for a steady price with last week's average.
October cattle closed off the lows made early in Monday's session and bounced off the 200 day moving average. Chart watchers are using 108.65 as important support. Resistance is 111.82.
USDA Hogs and Pigs Report will be released on Thursday, September 28. Trade will be watching for a confirmation of hog supplies for the 4th quarter of 2017 and 1st quarter of 2018.
October lean hogs had an outside day up on Monday after making new lows for the move. This is the first positive sign we have seen in a while. Support now crosses at 55.67 with resistance at 58.32.
Dressed beef values were higher with choice up 2.36 and select up 2.16. The CME Feeder Index is 152.60. Pork cutout value is down .80.
Technical Chart of the Day
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