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Grains Start Week With USDA In Mind

Published on: 11:43AM Nov 09, 2015

Good Morning! It's Monday, November 9th at 5:30 AM.

Grain markets are mixed ahead of tomorrow's USDA Supply and Demand Report. The US dollar will likely offer influence to commodity prices this week as well.

Tomorrow at 11:00 AM CST, the USDA will release its monthly Supply and Demand report.  Average analyst estimates have corn endings stocks at 1.597 billion bushels, soybeans at .436, and wheat at .877.

Corn world endings stocks are estimated at 188.43 million tonnes, soybeans 85.32, and wheat 227.82 for tomorrow's report.

On the technical charts, December corn took out the 372 support level Friday, but was able to close back above it. Without a surprise from the USDA tomorrow, this could leave corn trading in a small range.

Weather conditions in the U.S. corn and soybean regions were conducive to a continued harvest. This afternoon's USDA harvest progress report should show it very near complete.

Much of Brazil and Argentina received or are forecast to receive rains in their growing areas. At this time, weather does not look like a major factor for South American production.

India raised the price that its government will pay to buy wheat from local farmers from 1,450 rupees per 100 kg to 1,525 rupees.

Some feed millers in Indonesia are buying feed wheat from the Black Sea region to replace South American corn in animal rations as they await corn import quotas from the government. 35,000 tonnes of feed wheat has already been shipped, and a deal for another 50,000 tonnes was recently signed.

Friday's CFTC Commitment of Traders report showed managed money funds were net sellers of 8,835 contracts of corn (now net long 24,765), 22,852 soybeans (now net short 20,476), and net buyers of 15,023 contracts of wheat (now net short 18,241). In livestock funds were net sellers of 4,428 contracts of live cattle (net long 3,961), and 10,836 contracts of lean hogs (net long 27,717). Will we see more position evening by the funds before tomorrow's report?

Strong jobs numbers on Friday (271,000 jobs created vs. 183,000 expected) spurred strength in the dollar which had a negative impact on U.S. commodity prices. The good data also leaves many believing that the Federal Reserve will raise interest rates in their next meeting at the end of December.

Chinese economic data out this weekend showed the counties exports fell a disappointing 6.9% year over year. Analysts were expecting only a 3% drop. Imports also fell, at 18.8% percent year over year, vs the analyst expectation of 16%. The Chinese trade surplus now stands at a record $61.64 billion.

The U.S. economic calendar is empty today.

Cash hog prices through last Thursday, via the lean hog index, ran 64.61. We have a few weeks left of pressure on the cash market. Futures are implying 9.61 in continued losses. While this does sound like a bearish issue we cannot forget the seasonal issues which also come in to play.

Friday's 134.92 settlement for the December Live Cattle contract, and the appropriate basis applied for each week in the future, implies cash cattle will trade from $133 to $136 for the next two months.

Feeder cattle margins will increase with today's close. Initial margin for speculators will increase from $2,475 to $2,750. For hedgers, the margin will increase from $2,250 to $2,500 per contract.

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