Big Yields - No Demand - What Else
Jul 16, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for July 16, 2018.
Grain markets are not getting any supportive news. Crop conditions look great, tariff talks are at a stand still and the technical path of least resistance is lower. However, technicals are indicating over sold after Dec corn closed 18 cents lower for the week on Friday, November soybeans were down 60 cents and Dec wheat was 17 ½ lower for the week. History suggests markets have a tendency to make bottoms on bearish news. What should be our strategy into the fall? Call your Allendale broker today or sign up for the Allendale Summer Conference.
Watch this video explaining our upcoming Allendale Summer Conference Webinar!
Please click HERE for more information.
NOPA Crush report is due to be released at 11:00 AM CDT. The average guess for June soybean crushing is 159.6 million bushels which would be 3.6% over last year. If it comes as forecast, the year to date crush pace would be 5.9% over last year. USDA’s current old crop crush goal is 2.085 billion bushels or 6.8% over last year.
Weather patterns continue to support excellent row crop production for the Midwest. Trade is looking for crop conditions report this afternoon to go down 1 to 2%, however, in my weekend travels across northern Illinois from Chicago to Galena one would have to say crops can't look any better.
CFTC Commitment of Traders report showed managed money funds increasing net short corn positions by 33,566 to 104,376 contracts. Funds were basically flat in soybeans and wheat for the week.
Funds on Friday were estimated to be net sellers of 13,000 corn, 9,000 soybeans, 3,500 soymeal and 2,500 soyoil contracts. They were net-buyers of 8,000 wheat.
Safras & Mercado, an agricultural consultancy, estimates Brazilian farmers will plant a record 36 million hectares (88,957,937.33 acres) of soybeans in the 2018/19 season, which begins around September. This is an expansion by 2.3 percent from last year.
Macro markets as well as agricultural trade will be focusing this week on the Trump/Putin meeting. Earnings week will be heating up as trade will be taking a hard look at government bonds after the tame inflation data. Fed Chairman will be going to Capitol Hill for two days this week.
Managed money funds continue to press the lean hogs by increasing their net short position by 5,458. It appears the trend for increased pork production and the tariff wars are dominating their thinking. Funds were buyers last week in live cattle adding 2,592 contracts to make them net long 36,185.
Cash cattle this week will focus on feedlots trying to hold out for steady to higher prices while the slide in cutout values will likely reduce packers incentive to pay up. Futures prices will battle the weak product value trend, however, it already has a sharp discount to cash prices. Historically, we are in a seasonal switch in basis, going for a futures discount to cash to a premium to cash. Look for choppy trade over the next few weeks.
Pork production last week was estimated at 476.9 million lbs. or 4.7% over last year. The previous six weeks averaged 3.1% over. Hog slaughter was 2.285 million head which was over the 2.5% six-week average. Slaughter appears to have bottomed for the year and are now increasing sharply.
August lean hog futures were down $5.27 last week setting new contract lows. Technical support comes in at 68.50 with resistance near 73.00. Indicators are suggesting over sold therefore a short covering rally could occur at any time.
Dressed beef values were lower with choice down 2.44 and select down .64. The CME Feeder Index is 148.16. Pork cutout value is up .31.