Markets Rally Ahead of USDA Report

Published on: 10:53AM Aug 10, 2015

Good Morning! Paul Georgy with the early morning commentary for August 10, 2015 at 5:15 am.

Grain markets are higher as traders prepare for USDA reduction in 2015 harvest estimates. The large drop in fund long positions is providing underling support. The US Dollar is stronger and crude remains weak.

The week ahead will shed some light on row crop yields in the Midwest as seen by USDA. On Wednesday at 11:00 am CDT they will release their August Supply and Demand Report. The much talked about yield in the Eastern cornbelt and overall production of corn and soybeans will provide a basis to calculate changes until the September report.

South American production is another area trade is watching closely. Brazil’s CONAB put their soybean crop 1.7 mmt above USDA. Private agencies who are keeping track of South American exports and are guessing exports out of that region should be 2.0 to 3.0 mmt higher than USDA’s current expectation.

Managed money funds were net sellers in corn, soybeans and wheat last week according to the CFTC Commitment of Traders Report. Funds sold a net 79,002 contracts of corn to leave them net long 163,799 contracts. They sold 11,429 in soybeans and 19,141 in wheat. Managed Money Funds are now net long 50,866 in soybeans and net short 14,042 in wheat.

Crop conditions report this afternoon is believed to be lower than last week as many areas were dry. There also is a seasonal tendency for row crops to reduce the portion of the crop in the Good/Excellent category due to maturity.

The macro markets this week will focus on the continued assessment of whether the FOMC may raise interest rates at its next meeting on Sep 16-17, whether the Chinese stock market can continue to consolidate and whether the Eurozone and Greece will be able to reach a 3-year bailout agreement in time for Greece to make its debt payment to the ECB. This week has a light U.S. economic calendar.

Pork production is running at a very high level compared to a year ago when we were feeling the effects of the PEDv and the hold back of breeding stock. Pork prices have shown an increase in recent weeks as prices have been very competitive. Look for further retail interest going into Labor Day.

Live cattle and cash cattle appear to have made a seasonal low. Product values made a low in line with seasonal tendencies. The average rally from the summer low to the 4th quarter high is around 13%, however don’t expect a straight up market. Pick your opportunities to buy and use risk protection.

Dressed beef values were higher with choice up 1.15 and select up 1.75. The CME Feeder Index is 217.13. Pork cutout values are up 1.17.

Markets as of 5:15 AM CDT

  • Dec Corn   4 1/2
  • Nov Beans 6 1/4
  • Sep Wheat   2
  • Sep Soymeal 4.10
  • Oct Soyoil -.14
  • Sep Dlr     .27
  • Sep S&P   4.00
  • Sep Crude   -.03
  • Aug Gold    .02

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