USDA Report Week Begins With Weather Concern
Oct 09, 2017
Good Morning! From Allendale, Inc. with the early morning commentary for October 9, 2017.
Grain markets look to weather in South America as concerns of dryness in Brazil have the attention of traders. Outside markets will have some economic data to trade this week as well as a few Fed speeches.
Bloomberg average estimates for this Thursday's USDA Supply and Demand report show analysts are expecting corn 17/18 ending stocks of 2,251 million bushels, soybeans of 452 mb, and wheat 944 mb. Total US corn production is estimated at 14,171 million bushels, while soybeans are estimated at 4,437 mb.
Over the past 20 years, from September to the January report, corn yields were raised 14 times for an average of 2.2% (equivalent of 173.7 bpa). There were 6 years of declines that averaged 2.5% (implying this year at 165.1). Soybean yields over the past 20 years have been raised 11 times from September to January. The average increase would be 5.1% (implying 51.9 bpa this year). That "average" computation includes three dramatic years of changes (2003 10.4%, 2004 9.3%, 2012 12.2%).
Informa raised its corn yield forecast up from 169.7 bpa to 170.5. Production was raised from 14.115 billion to 14.182. Soybean yields were raised from 49.9 bpa to now 50.0. Production was increased slightly, from 4.470 billion to 4.474.
World Weather, Inc. says, "The bottom line for Brazil will continue very good for much of center south Brazil where rain fell abundantly last week and bolstered soil moisture for spring planting; follow up rain will be needed soon, however. Portions of far southern Brazil may be a little too wet for optimal crop development and fieldwork."
Managed money funds were relatively quiet in the ag markets for the week ending October 3rd. CFTC data showed they sold 9,759 contracts (futures and options combined) of corn, and 562 contracts of soybeans. They are now net short 143,201 corn, and net long 27,758 soybeans. They were buyers of 8,224 wheat contracts and are now short 56,475.
Friday's fund activity estimates showed that managed money were mostly buyers. Traders estimate they bought 1,500 corn, 4,000 soybeans, 2,000 wheat, and 2,500 soymeal. They were estimated sellers of 1,500 soyoil.
Economic reports out this week include Initial Claims and Continuing Claims on Thursday, and CPI and Retail Sales on Friday.
House Ag Chairman, Mike Conaway, went north to Canada this weekend to, "communicate a sense of urgency" regarding the NAFTA renegotiations. Time will tell if the meetings do any help.
The monthly release of meat trade data brought August US pork exports to 418.004 million lbs. That was minimally higher than last year. It would still likely be considered a slight disappointment. Exports in June were 4% while July levels were -3% with last year. Year to date exports are 9% over last year. August imports of 99.511 million were 2% under last year.
August beef exports ran 263.764 million lbs., 16% over last year. This would be seen positive. It was over the June and July year over year increases at 12% and 11% respectively. This was the largest monthly export since July 2013.
Funds were net buyers of 4,324 live cattle contracts in data through October 3rd, putting them net long 96,682 contracts. They also bought 2,920 lean hogs to be long 56,546.
Dressed beef values were lower with choice down .03 and select down 1.55. The CME Feeder Index is 155.57. Pork cutout value is down .27.
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