December 12, 2017

South American Weather Far From Prefect

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

Grain markets wrestle with the US harvest and better than expected yields while South American planting is underway, in less than ideal conditions.

USDA October Supply and Demand report will be released on Thursday the 12th. The key data points to be watched are changes in yields for corn and soybeans and planted acreage adjustments which could be seen on this report. We also expect USDA to adjust ending stocks accordingly because of the September 1 Quarterly stock report last week.

Allendale's Rich Nelson, has no problem recognizing bearish supplies. And corn ending stocks data is the largest old crop ending stocks since 1987/88 is not quite as bearish as it sounds. Ending stocks of current year should not be compared against stocks from almost 30 years ago. The massive demand base makes the comparisons obsolete. Stocks to use, (ending stocks divided by usage), is the best measure of "tightness of supply". US stocks-to-use levels are the largest since 2005/06. World stocks-to-use are tightening. USDA's 19.2% world stocks-to-use estimate is tighter than the previous three years. Allendale's 17.5% estimate is the tightest in four years.

Informa increased US corn yield estimates to 170.5 and soybean yields to 50.0 for the 2017 harvest.

US Midwest river terminal basis bids continue to improve as barge freight declines. Lack of farmer selling is also providing support for soybean complex as seasonal gulf export demand is a driver.

Corn exports totaled 814,054 metric tonnes which was within the 500,000-700,000 tonnes trade expectation. The US has sold so far 479 million bushels of corn for export this marketing year. That is below the 540 million bushels five-year average by this point. USDA's goal for the 2017/18 is to run 6% over the five-year average.

Soybean export sales came to 1,016,122 metric tonnes which was on the low end of trade expectations. Total sales through September 28 came to 857 million tonnes which was under the 922 million tonnes five-year average and certainly not at a record pace, USDA expects this year.

Crop Progress report and the weekly export sales along with other weekly reports will be pushed back by a day next week because of the Columbus Day (government holiday) on Monday October 9th.

Funds were estimated as net buyers of 2,500 corn contracts and 8,500 soybeans. They were net sellers of 2,000 wheat contracts on Thursday.

Weekly beef exports totaled 20,842 metric tonnes. This was the best sale in five weeks. It also is 19% over last year for the same week. Year to date sales are 9.9% over last year.

Cash cattle trade has been very quiet this week with packers pulling ahead contracts to fill needs. The strength in futures is giving the feedlots hope and therefore are holding firm on their offers. A cash trade above 110.00 could open the gate for a several dollar rally in futures and cash.

October live cattle first notice day is Monday.

Pork export sales totaled 21,153 metric tonnes last week. That was 1% under last year in the same week. The previous week was a very large 36,658 tonnes. Year to date pork sales are 8.9% over last year

December lean hogs bounced off the 200-day moving average and closed at highest levels since August 16th. The December contract has gained 2.85 this week. Resistance levels could be drawn at 64.00 and 65.50. Support comes in at 61.00 and 59.00 on the weekly charts.

Dressed beef values were lower with choice down .16 and select down .77. The CME Feeder Index is 155.65. Pork cutout value is unchanged.

Technical Chart of the Day

If you have any questions on any of our content, give us a call at 800-262-7538 or service@allendale-inc.com


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