October 23, 2014

Funds Find Bargains in Grains

October 22nd, 2014

Good Morning! Paul Georgy with the early morning commentary for October 22, 2014 at 5:30 am.

Traders Focus: Money flow, technical and computer trade signals, harvest weather and demand.

Grain markets are mostly higher lead by the soy complex.

The strength in the soymeal in recent days has been a major catalyst providing support to the soy complex. The wet weather and reduced harvest progress has crushers caught with meal commitments and can’t crush the beans fast enough. Once the pipeline is filled there should be a plentiful supply due to the bountiful harvest.

Producers are focusing on harvest and trying to figure out what to do with the crop as they weigh selling to storing alternatives.

Money flow and short covering is also a factor. Computer activated buying could trigger even more buying if overhead resistance is broken.

The forecast is virtually unchanged from Monday. The US Corn Belt looks to see only light scattered showers over the next 10 days which should allow rapid harvest progress. South American weather forecast is for wide spread moisture for northern Brazil (the dry area) in coming days.

Oil World estimates Brazilian new crop bean production at 89 mmt, down 3 mmt from previous estimate and 5 mmt below USDA’s latest production estimate.

USDA’s said at the trade data users meeting in Chicago that they had 35% of their soybean field plots harvested for the October report verses 89% for corn. They relied heavily on a farmer survey for the October report and thus many believe that soybean production has much more room to the upside based on yield reports we are hearing.

Update – Morning Coffee Commentary:

(U of IL Ag Econ) Lower prices are resulting in lower gross revenue projections for both 2014 and 2015. These lower projections will require lowering or eliminating capital purchases, lowering fertilizer and seed costs, lowering cash rents, and reducing other cash flows.

Hog weights remain above a year ago although not as dramatically as in recent months. This time a year ago, it became more profitable to feed hogs to a larger size. Slaughter numbers are increasing and pork values continue to slide. Retailers are buying “hand to mouth” as we approach the holiday season. Pork cutout values were down another $2.42.

US Cattle on Feed report for Sept to be released Friday at 2 PM CST. Trade is expecting On Feed at 99.7%, Placed at 101.9% and Marketed during Sept. at 99.1%.

Steer weights have gone from 875 a year ago to 896 last week. There is no question the economics works to feed cattle longer and larger rather than replacing them with lighter feeders. Therefore is the current tight supply of market ready cattle due to lack of numbers or due to cattle being fed longer? Beef values are mostly steady as choice was unchanged and select down $.24. The CME Feeder Index is 240.80.

Markets as of 5:30 AM CDT                                                                     

Dec Corn   +0        
Nov Beans   +9 1/2
Dec Wheat   + 1/2
Dec Cattle  +.07
Dec Hogs    -.15
Dec Dlr     +.21
Dec S&P   -5.00
Dec Crude   +.17
Dec Gold   -4.90

Technical Chart of the Day

daily chart

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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.