Will USDA Play With 2018 Yields?
May 10, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for May 10, 2018.
Grain markets are quiet as traders make last minute adjustments ahead of the USDA report at 11:00 am CST. USDA will give us their first supply/demand projections for the 2018/19 row crops. Trade is expecting a sizeable reduction in ending stocks for corn in 2018/19, mostly due to the smaller planted acres. Soybean stocks could hold steady with 2017/18. Trade also is keying in on the number USDA will be using for Argentine corn production and Brazilian soybean production.
Allendale will be tweeting Live at 11:00 when the numbers are released. Rich Nelson, Allendale’s Chief Strategist, will be presenting a video shortly after the release of the report. He will be breaking down the numbers and what changes USDA made on the May report.
USDA weekly export sales estimates for the 7:30 am report is: Wheat 0-350,000 old crop and 200,000-350,000 new crop; corn 700,000-1,000,000 old crop and 50,000-300,000 new crop; soybeans 300,000-600,000 old crop and 100,000-300,000 new crop; soymeal 100,000-400,000; soyoil 15,000-60,000. All estimates are in metric tonnes.
Ethanol production last week was a strong 1.040 million barrels per day. This was 3.4% over last year which puts year to date production at 2.3%. USDA’s current goal is 2.6% year/year gain. Trade is not expecting USDA to lower their corn for ethanol estimate on today’s report. Normal fluctuations in the efficiency rate can offset this small shortfall.
US Dollar index remains strong as the Euro currency tests lows of November 2017. Traders expect the dollar to remain strong as long as the Fed strategy is to raise interest rates several more times this year.
President Trump will meet with the chairmen of the House and Senate Agriculture committees on Thursday and is expected to threaten to veto a farm bill that doesn’t tighten work requirements on food stamp recipients, according to a source familiar with the meeting plans. (Agri-Pulse)
Funds were estimated to have been net-sellers of 5,000 corn contracts, 4,500 soybeans, 4,000 wheat and 2,000 soymeal contracts on Wednesday. They were net-buyers of 2,500 soyoil.
Fed Cattle Exchange had offered 2456 head at the electronic auction on Wednesday, all with no sales.
June live cattle futures remain in a up-trending channel; however, it is important for this contract to hold the 104.00 level on a closing basis. The underlying support is provided by the abnormal wide spread between the June futures and the current cash cattle prices. Trade is expecting a decline in the cash market to occur soon as market ready numbers are increasing based on previous USDA cattle on feed reports.
Beef demand has been good during May Beef Month and pre-holiday bookings by retailers. Seasonal traders are pointing to the fact that cattle prices peaked the first week of May last year and the 3-year average is for cattle to top the first week of May. Time will tell if we have seen the highs in cash cattle.
Lean hog futures ended mixed Wednesday as spread traders dominated the close, buying the June contract and selling the October contract. The June futures closed above the 50-day moving average for the first time since mid-April.
Seasonal tendencies suggest tighter cash hog supplies into the summer months which should be supportive to prices. However, June futures already have a $13.00 advantage to the current cash values. June futures contract has support near 75.00 with resistance at 79.00.
Dressed beef values were mixed with choice up .03 and select down .98. The CME Feeder Index is 138.00. Pork cutout value is up .74.
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