Weather and Macros Loom Large Ahead of Next Report
Feb 07, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for February 7, 2018.
Grain markets look to South America once again as dryness concerns remain. Outside markets continue to see strong volatility with the Dow Jones trading over an 1,100 point range yesterday. Traders also look to Washington as a budget deal needs to be made to avoid another government shutdown.
USDA's Supply & Demand report is set for release tomorrow morning. The average analyst estimate for US corn stocks is 2.468 mt. For South America, we see Brazil corn production at 94.0 (USDA Jan 95.0) and Argentina at 41.0 (USDA Jan 42.0). The average trade guess comes to 93.7 for Brazil and 40.7 for Argentina.
Soybean ending stocks are estimated at 486 mt according to the average trade guess. Allendale suggests US exports could miss USDA's goal by anther 300 million potentially, and USDA may begin to recognize this tomorrow. South American production is estimated at 111.2 million tonnes for Brazil and 54.1 for Argentina.
CME Group is considering changes to its soy and corn contracts. At issue is the lack of convergence between futures and cash prices upon a contracts delivery. One possible solution being discussed is implementing a variable storage rate (VSR) at contract delivery points. Proponents of the idea believe the VSR would allow adjustments to local prices so that they more accurately reflect true value. No details have been given on when changes might occur.
UkrAgroConsult expects Ukrainian soybean acreage to decrease by 14 to 17% in 2018 due to shrinking profits from planting the crop. Last year, Ukraine produced 3.89 million tonnes of soybeans.
Funds were estimated buyers of 18,000 corn contracts, 13,500 soybeans, 7,000 wheat, 6,000 soymeal, and 7,000 soyoil in yesterday's trade.
EIA will be out with weekly ethanol production numbers this morning, along with crude oil inventories.
President Donald Trump on Tuesday called for a government shutdown if Congress does not pass what he considers adequate border-security measures. “If we don’t get rid of these loopholes where killers are allowed to come into our country and continue to kill...if we don’t change it, let’s have a shutdown,” Trump said. (Politico)
Consumer Credit will be out this afternoon at 2:00 PM CST. Beyond economic reports, macro traders will monitor the equity markets as the recent volatility continues in the major indexes.
The Dalian Commodity Exchange is set to launch China's first live hog futures contract. Final approval of the contact is pending with the State Council, but is expected. An exact time-frame for the release has not been announced.
Cash cattle bids of $124 were passed over yesterday. That is $2 under last week. Cash may trade steady at $126 this week.
This week, and the next two, are the lowest supply weeks of the year typically. Keep in mind, however, that does not always match up with the highest prices of the year.
Dressed beef values were lower with choice down 1.00 and select down 1.43. The CME Feeder Index is 147.95. Pork cutout value is down 1.89.
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