December 15, 2017

Count Down to Finishing Harvest

Good Morning! From Allendale, Inc. with the early morning commentary for November 6, 2017.

Grain markets are finding some short covering after large buildup in short positions last week. Trade is expecting to see some adjusting of positions as a USDA report will be released on Thursday and weather forecasts provides hopes for harvest to be completed before Thanksgiving.

Weather remains a bearish factor with ample Brazil rains and diminishing Argentine precipitation. US forecast suggests two-thirds of Midwest enjoys favorable weather for the final push of corn harvest.

Harvest progress is expected to be near 75% complete (85% average) in corn and 91 to 93% in soybeans with 91% average.

USDA over the past 20 years has raised corn yields 11 times on the October WASDE report. In those 11 years, they raised it again on the November report 8 times. Of those 8 higher Novembers, the average increase was 0.9% bpa. That would suggest a rise from last month's 171.8 to 173.3 bpa.

USDA has lowered soybean yields 8 times in the last 20 years on the October report. In those years, they lowered it again on the November report 7 times. The average decline in those 7 years was 0.6%, suggesting yield on Thursday’s report could be 49.2.

CFTC Commitment of Traders weekly report showed managed money funds net sellers in grains last week. In corn they were net sellers of 28,369 contracts making them net short 202,763 contracts. Funds were net seller of 26,910 contracts in wheat and 8,634 contracts in soybeans.

Funds were estimated to have been net sellers of 8,000 corn, 9,000 soybeans and 1,000 wheat on Friday.

Baker Hughes Rig Count: U.S. -11 to 898, Canada +1 to 192.

Managed money funds were significant net buyers last week as they add 11,645 live cattle positions and 3,284 lean hog positions.

Cash cattle jumped late last week adding nearly $5.00 cwt. This caused futures to catch up with several contracts touching the 3.00 limit. Starting the week, traders will be watching cash market indicators such as strength of product, showlists and the ability of futures to remain strong in an overbought condition.

February futures closed at the contract high price on Friday. Technical resistance now looks to be near 135.00 with support at 128.00.

On Tuesday the Goldman Roll starts and is expected to run for 5 business days.

Lean Hog futures appear to be consolidating near their contract highs. February futures have resistance at 73.30 and support at 68.00. Trend remain up.

Dressed beef values were mixed with choice up .49 and select down .08. The CME Feeder Index is 158.71. Pork cutout value is up .68.

Technical Chart of the Day

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