February 11, 2016

Crude Oil Slides to 2003 Levels

February 11th, 2016

Good Morning! Paul Georgy with the early morning commentary for February 11, 2016 at 5:00 am.

Grain markets are mostly steady to slightly higher ahead of export sales data. Outside markets slide as US economy concerns drives traders risk off attitude. The stock indices are sharply lower while crude oil drops to near $26.00 per barrel.

Drew Lerner from World Weather Inc. says “the jury is still out in regard to whether La Nina will influence world weather in 2016 or not. World Weather, Inc. is becoming more confident that there will be no La Nina during the growing season in 2016 and if that proves correct other prevailing weather patterns will rule North America and other areas around the world.”

Farmer sales are slow and some grain merchants are unwilling to increase bids to entice movement. Margins for crushing soybeans and processing corn are under pressure. Merchants are also expecting farmers to move grain soon as they will need to raise cash to cover input cost for planting this year’s crops.

Weekly export sales data will be released at 7:30 this morning. Trade estimates are: corn 800,000 to 1,000,000 tonnes, soybeans 300,000 to 600,000 tonnes, soymeal 100,000 to 250,000 tonnes, soyoil 5,000 to 20,000 tonnes and wheat 150,000 to 350,000 tonnes.

Comments from RJ O’Brien’s commercial contacts in Brazil and Argentina suggest crop conditions are excellent in both countries. Harvest is progressing in Brazil’s soybeans at 8% complete which is equal to last year and the 5 year average. Brazil’s 1st crop corn harvest is 10% complete versus 6% last week and 10% a year ago. Argentine corn crop will likely get bigger not smaller unless a weather change would cause some crop stress.

The French farm ministry made a slight adjustment to the area sown with winter soft wheat for the 2016 harvest at 5.20 million hectares, compared with 5.22 million hectares in their December estimate.

Bunge Ltd has launched legal proceedings against Egypt's state grain buyer over a rejected cargo of French wheat due to ergot levels.

Weekly initial unemployment claims at 7:30 am. Trade estimates expected -5,000 to 280,000, previous +8,000 to 285,000.  Weekly continuing claims expected -10,000 to 2.245 million, previous -18,000 to 2.255 million.

Fed Chair Janet Yellen appears before the Senate Banking Committee at 10:00 am to deliver the Fed’s semi-annual monetary policy report to Congress.

Based on customer requests, CME Livestock futures and options trading hours will be reduced to align with the period of greatest liquidity in these markets. During 2015, roughly 87% of daily Livestock futures and options trades occurred during the proposed hours. Effective Monday, 29 February, and pending CFTC approval, the proposed trading hours for Live Cattle, Feeder Cattle and Lean Hog futures and options will be as follows: CME Globex futures and options: 8:30 a.m. to 1:05 p.m. Central Time (CT) Monday to Friday. Open outcry options: 8:30 a.m. to 1:02 p.m. CT Monday to Friday.

USDA released the monthly trade data for the month of December. Beef exports slipped a little with the new reading of 196.056 million lbs. which was -8% from last year. That compares to the November reading of -1% year over year. Don't forget that from August through October exports ran from -14% to -25%. Helping out then balance sheet was the import number of 186.206 million lbs. which is 35% under last year.

Cattle traded at 134 in TX and NE yesterday which was 2.00 lower than last week. However using a normal basis the futures are pricing in a 132.00 cash price by the end of the month.

USDA reported 428.639 million lbs. of pork exports which was 9% over last year.

Last trading day for February Lean Hog contract is Friday February 12.

Livestock stock futures are still trading with an eye on the stock indices and crude oil. Volatility will remain with us for a while.

Dressed beef values were higher with choice up .16 and select up .02. The CME Feeder Index is 159.49. Pork cutout values are down .12.

5:15 am - Markets At-A-Glance

  • Mar Corn   - 1/4 
  • Mar Beans +2
  • Mar Wheat   +2
  • Mar Soymeal +.70
  • Mar Soy oil +.11
  • Mar Dlr     -.34
  • Mar S&P   -31.50
  • Mar Crude   -.97
  • Apr Gold   +32.90

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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