April 30, 2016

Weaker Dollar Drives Money to Commodities

April 29th, 2016

Good Morning! Paul Georgy with the early morning commentary for April 29, 2016. Coming to you from Springfield MO again today. We had a great visit with the branch offices yesterday.

Grain markets are mixed as overnight traders mull the volatile last couple weeks of trade. Outside markets have crude oil slightly lower.

More Market Commentary:

Morning Coffee Commentary 4-29-16

The weaker US Dollar continues to drive money flow into the commodity markets as seen yesterday in the grains. The large range volatility we have seen during recent sessions is causing large moves in intra commodity spreads. Look for the choppiness to continue. As we end the week and month, expect more positioning as large players close month-end books.

Today is first notice day in May grain contracts. Deliveries of wheat, corn and soybeans against Chicago Board of Trade futures should be light on the first notice day today for CBOT May grain contracts. For corn and soybeans, trade is estimating zero to 300 contracts. Traders also estimated wheat deliveries at zero to 300 lots. Soymeal delivery estimates ranged mostly from zero to 200 contracts and soyoil forecasts from 500 to 1,700 contracts.

The USDA reported weekly export sales yesterday morning. For corn, an impressive 2.601 million tonnes of corn sales were reported (old and new crops combined). This was well over the 1.2 - 1.7 million estimate, and a marking year high. Year to date sales are 88% of USDA's whole-year goal, which is still a little under the five-year average pace of 91%.

Soybean export sales totaled 946,475 metric tonnes, within the 700,000 - 1,100,000 range. We have now sold 98% of USDA's goal, right next to the 99% five year average. Wheat sales were reported at 806,591, over the 375,000 - 625,000 estimate.s and is supportive. Sales are now 95% of USDA's goal. Normally we have sold 102% for the marketing year ending May 31st.

As many as one-third of Argentina's soy farms remain too wet for harvest with crop loss estimates as high as 5 million tonnes according to a Rosario grain exchange agronomist.

Dry weather in Brazil, on the other hand, could reduce the country's winter corn crop by 5 million to 10 million tonnes. This could also decrease the counties exports by a similar amount according to Bunge CEO, Soren Schroder.

The Bunge CEO also said they are going to step up providing credit to the Brazilian farmer as the banks in South America scale back due to economic turmoil.

The USDA Attaches sees Ukraine corn production up 18% from last year, and the wheat crop down 10%. Both are due to dryness issues in the Ukrainian wheat crop.

Fears of a "boom-and-bust cycle" have prompted financial regulators in China to order the country's commodity futures exchanges to reign in speculative trading. It is not yet known what steps the exchanges are expected to take, however, margin requirements and trading fees have all been increased in recent weeks.

Economic traders will have a busy morning this morning with personal income, personal spending, core PCE prices, and the Employment Cost Index all due at 7:30 AM CDT. Chicago PMI is due at 8:45, and Michigan Sentiment is out at 9:00 CDT.

Cash cattle trade has developed in the south at the 124 level with April contract going off the board, we should find some support in the April futures ahead of the noon settlement.

The June contract is getting hit with technical selling prompted by the weak cutout values. However, we must remember that the deferred contracts have another $10.00 break in the cash cattle trade by mid-summer. History suggests if we get a break projected by current futures prices, it would be a record percentage break from Spring highs to summer lows. Long term, the weak prices now will tighten supplies later due to a pickup in beef featuring at the retail counter.

Lean hogs futures are benefitting from the weakness in cattle as traders are spreading, buying hogs and selling cattle.

Dressed beef values were lower with choice down 2.31 and select down 2.50. The CME Feeder Index is 144.81. Pork cutout values are down .05.

Markets At-A-Glance – 5:30 AM

  • May Corn    + 1/2
  • May Beans   - 3 1/2
  • May Wheat   - 1/2
  • May Soymeal -1.50
  • May Soy oil +.18
  • Jun Crude   +.52
  • Jun Gold    +12.90

Technical Chart of the Day

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    Allendale Advisory Contributor:


    Paul Georgy

    Paul is one of the founders of Allendale. He is very active in the futures industry and currently serves on the Board of Directors of the National Futures Association.
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