Poor Export Sales & Strong Dollar Slams Markets
Oct 26, 2018
Good Morning from Allendale, Inc. with the early morning commentary for October 26, 2018!
Grain Markets dropped sharply on poor weekly export sales in corn and soybeans. Large harvest advancements and a stronger dollar are adding to the downward seasonal pressure to future prices. With option expiration, a tense political environment, and the weekend in front of us, continued volatility is expected.
U.S. Wheat Futures fell 12.5 cents, with December contracts hitting its lowest in nine months, as sluggish export demand and a strong dollar influenced fund liquidation. Reports surfaced some Asian flour mills will be looking to lock in wheat supplies until the middle of 2019, potentially calling off several years of hand-to-mouth buying as global supply is estimated to drop for the first time in six years.
Weekly Export Sales for the week ending October 18th were released showing wheat sales at 448,500 tonnes (expecting 200,000 to 500,000 tonnes), corn at 377,500 tonnes (expecting 400,000 to 800,000), and soybeans at 213,700 tonnes (expecting 300,000 to 700,000). Historically, this is a big sale week for soybeans.
The CBOT will reset price limits for grain and oilseed futures effective November 1st, 2018. Soybean price limits will be reduced from 75 cent limits to 60 cents, soybean meal price limits will move down from 25 cents to 20 cents and soybean oil price limits down from 250 points to 200 points.
IGC estimates global wheat production at 728.8 million tonnes, higher than previous forecast of 716.7 million although still well below the prior year's 767.1 million tonnes. China's wheat crop was increased to 134.7 million tonnes from 122.5 million, although it also still trails last year's 138.2 million.
USDA estimates world wheat output to drop to 730.92 million tonnes by June 2019, compared with a record 758.74 million tonnes in 2017-18. Global production has hit successive all-time highs since the 2013-14 crop season.
Chinese Soybean Imports remain a hot topic in the ag markets. Allendale's Rich Nelson gave us his take on the state of the Chinese soybean situation as well as expectations for what may come next. Listen to the free webinar here.
The World's Largest Agribusinesses (ADM, Bunge, Cargill & Louis Dreyfus) are partnering together to standardize and digitize international grain trades using blockchain and artificial intelligence. The goal is to make international commodity trades more efficient and transparent and reduce costs.
November Options go off the board today. First notice for November contracts is next week Wednesday, October 31st.
Managed Money Funds were estimated sellers of 26,000 corn contracts, 10,000 soybeans, 10,000 wheat, 2,500 soymeal, and 3,000 soyoil in yesterday's trade.
GDP will be released this morning at 7:30 AM CDT. Analysts are expecting to see a number around 3.3%, and the number could impact equity markets. Michigan Sentiment is due at 9:00 AM and will also be closely followed.
Beef export sales this week totaled 14,637 metric tonnes for the current year. Pork export sales during this specific week totaled 8,665 metric tonnes.
The weekly Actual Slaughter report had average cattle carcass weights unchanged from last week at 831 lbs. That marks three weeks in a row at 831. Compared with last year, this weight is 0.8% over last year. Dressed hog weights, specifically barrows and gilts, rose by 1 lb. in the latest week to 208. That brought weights up from 0.5% under last year to now even with last year.
Dressed Beef Values were higher with choice up 1.71 and select up 0.49. The CME Feeder Index is at 153.65. Pork cutout value was down .37.