First of Month Inflow of Money Provides Opportunities for Hedgers
May 02, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for May 2, 2018.
Grain markets are being lead by inflows of money as the fundamental news is not changing enough to justify the overall strength in soymeal and wheat. Funds have been net-short wheat for several years. It appears they are taking a different stance as the US crop size shrinks. Corn traders are focusing on Brazil’s second crop corn, late planting in the US and carryover support from wheat. Soybeans are getting their price lift from the jump in soymeal prices. Argentina’s soybean harvest is now being slowed by too much rain.
World markets re-open today after the May Day holiday yesterday. Top US officials are headed to China to negotiate an end to trade imbalance and to stall an escalation of a trade war.
US Dollar Index is creating a bit of a headwind for bulls in the grain and oilseed complex as its rally on Tuesday broke the 16 month down trend.
USDA’s March soybean crush was 182.2 million bushels, it was under the 183.2 trade estimate. However, it is still a record and 13.9% over last year. September through March crush now comes to 1.193 billion bushels. That is 4.7% over last year. USDA’s goal for the year is 1.970 billion bushel, which to hit their goal we need to crush 872 million bushels from April through August.
Funds were net buyers on Tuesday (the last day of their reporting week to CFTC). They were thought to have bought 14,000 corn contracts, 4,000 soybeans, 10,500 wheat and 7,000 soymeal. They were net sellers of 3,500 contracts of soyoil.
Kansas wheat tour will finish their field survey later this week. Numbers for reference: in 2017 Kansas wheat production was 48.0 bushels per acre for a total 333.6 million bushels. In 2014 Kansas had the worst crop in recent years of 28.0 bushels per acre with total production of 246.4 million bushels.
Packers have bought some cattle in the North for 122 with a 3-week delivery. The fact remains they need market ready cattle to fill demand by retailers. Cutout values continue to jump, and choice has broken a $225.00 resistance level. Feedlots will likely play hardball through Friday unless a decline in futures breaks their confidence.
Trade continues to struggle with the question: Where are all these cattle everyone is projecting to come to market in 2nd quarter?
June live cattle futures were lower on Tuesday but well off the lows. The trend remains up with channel resistance at 107.82 and channel support at 103.82. It is important for technical traders that June futures do not close below 103.82 to maintain the uptrend.
Bull spreading in the hog complex maybe giving us the first sign of a potential low being made in June lean hog futures. Technical support in the June contract is 72.20 with resistance at 75.00.
Dressed beef values were higher with choice up 2.01 and select up 2.30. The CME Feeder Index is 139.27. Pork cutout value is up .43.
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