September 20, 2017

Grain Markets Waiting for Pickup In Demand

September 20th, 2017

Good Morning! From Allendale, Inc. with the early morning commentary for September 20, 2017.

Grain markets are consolidating as traders look for positive news. Early harvest results continue to vary greatly. Many producers are surprised with early harvest yields. A Farmer in Northeast Nebraska is harvesting dryland corn yielding 180 to 200 bpa when he was expecting 160 to 170. A farmer in Southeast Iowa is harvesting 37 bpa soybeans when last year it was 55. He will harvest corn next week, hoping for 150 when last year he hauled in 200 bpa.

Rich Nelson, Allendale's Chief Strategist says Southeast Iowa had the second worst yield projection during Allendale's Farmers Survey with South Central Iowa reporting the largest yield decline.

World Weather Inc. says impressive weather dynamics are present across North America this week. Weather contrasts will be significant for the coming seven days and then a quick swoosh of frigid air will move through the continent followed by temporary warming.

CME October grain options expire on Friday. USDA Quarterly Stocks report will be released a week from Friday on September 29.

Funds were estimated to have been net sellers of 7,000 contracts in corn, 4,000 in soybeans and 2,500 in wheat on Tuesday.

Canada: The latest Stats Canada's estimate of crop production could be a bit supportive. Their estimate for wheat production was seen at 27.1 million tonnes vs. last year's 31.7. This estimate is next to USDA's latest 26.5 mmt estimate. Smaller crops in the United States, Canada, and Australia are the driving factors behind lower world wheat production.

Hurricane Harvey ravaged the massive fuel-making industry along the Texas coast three weeks ago and now the regions recovery from storm damage is starting to disrupt plans for crucial maintenance at refineries thousands of miles away from the flood zones as being reported by Bloomberg. Harvey knocked out almost one-quarter of U.S. refining capacity in late August.

Australia raised its forecast for beef production during the 2017/18 season by more than 6 percent due to dry weather forcing ranchers to increase slaughters. Beef production from the world's fourth largest exporter will total 2.244 million tonnes this season.

Cattle on Feed report will be released on Friday at 2:00 pm CDT. Allendale's estimate for Cattle on Feed as of Sept 1 is 102.1%, Placed during August at 92% and Marketing during August at 104.9%. Trade will view these numbers as friendly. Monthly Cold Storage report is scheduled for release on Friday.

Fed Cattle Exchange is offering 1450 head of cattle this week. Early eastern cornbelt auctions are reporting a steady lower price compared to last week on moderate supplies. The feedlot trade is expecting steady to higher before the week is over.

Beef product values have fallen enough to be competitive with pork at the retail counter. Positive margins continue to drive the packer's  incentive to process as many cattle as possible.

October live cattle futures remain in a trading range between support at 104.20 and resistance at 109.75.

Lean hog futures in recent sessions have been influenced by weak cash and product values. Spreaders have also been pressuring the nearby October contract.

Dressed beef values were mixed with choice down .51 and select up 1.13. The CME Feeder Index is 150.47. Pork cutout value is down 1.77.

Technical Chart of the Day

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