Can Grains Rally After The Report?
Sep 11, 2014
Good Morning! Paul Georgy with the early morning commentary for September 11, 2014 at 5:30 am.
Grain futures are lower as traders prepare for a bearish report. Results from today’s USDA Supply and Demand report are available here.
Traders Focus for today: Export sale data at 7:30am, USDA Supply and Demand report at 11:00 am with an eye on yield and old crop ending stocks. After the report the focus will switch to frost fears over the next 3 days.
Trade estimates for weekly export sales last week: wheat 250,000 to 450,000 mt, corn 450,000 to 650,000 mt, soybeans 750,000 to 1,000,000 mt, soymeal 100,000 to 200,000 mt and soyoil 0 to 20,000 mt.
Update - Morning Coffee Commentary
The weather forecast and actual temps will determine yield loss and play into market action shortly after the USDA report. Make sure to read Allendale’s Meteorologist Ryan Martin’s Blog this morning and listen to his audio broadcast at midday to stay in touch with weather probabilities.
Our Friends at World Weather Inc. have the following thoughts: The surge of cold expected in the Canadian Prairies, northern Plains and upper Midwest Thursday into Sunday will result in widespread freezes in in Canada. Most of the crop damaging cold will only affect areas outside of key grain and oilseed areas in the U.S. Midwest. Very few corn or soybean production areas will be threatened by temperatures near or below 28 degrees Fahrenheit and that should minimize the potential for production losses.
A study performed by Allendale’s Research suggests the USDA will not give us the full yield increase on the September report and use this report as a stepping stone to the final number in January.
Trade Average guess:
Production Yield Production Yield
Avg estimate 14.288 170.7 3.883 46.2
U.S. ending stocks 2013/14
Avg estimate 1.191 0.136
U.S. ending stocks 2014/15
Wheat Corn Soy
Avg estimate 0.667 2.012 0.453
We'll have a full analyis of the report after it's release at 11:00 am CDT.
An observation which you must be aware of is that the grain markets are oversold technically and market psychology is bearish going into an expected bearish report. Will the concern over frost give us enough reason for a short covering rally? Talk to your Allendale Brokers about strategies to protect hedges.
Chinese soybean crush margins are running at a 2 year low while US crushers are profitable and are looking for soybeans to fill the gap before harvest.
Ethanol production last week averaged 927,000 bpd vs 921,000 bpd the previous week. Cheap corn and strong crush margins drive processor incentive to produce more ethanol.
The Rosario exchange estimated farmers in Argentina plant 3.7 million hectares (9.1 million acres) of corn, down 700,000 or 16 % from the 2013/14 season due to high inflation pushing up production costs.
Light cattle trade in cash market at steady with last week. Cutout values have not kept up with fed cattle values putting packer margins at near breakeven. Tight supplies in feedlots are the driver and should provide support to nearby futures. Beef values are mixed with choice up .38 and select down .50. The CME Feeder Index is 226.38.
Spreaders dominated the trading volume in the lean hog futures on Wednesday. It was thought to have been liquidation of bear spreads by a few large players which drove deferred contracts to near limit down. Hog supplies should trend higher into fall with weights still running 10 to 12 pounds above a year ago. Pork cutout values are up .87.
Markets as of 5:30 AM CDT
- Dec Corn -1 3/4
- Nov Beans -3 3/6
- Dec Wheat -3 1/4
- Oct Cattle -.30
- Oct Hogs -.07
- Dec Dlr -.04
- Dec S&P -3.50
- Oct Crude -.60
- Oct Gold +.30
Chart of the Day
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