August 26, 2019

Traders Question Acreage Numbers

Good Morning from Allendale, Inc. with the early morning commentary for August 14, 2019.

Grain markets are higher as traders attempt to sort out the reality of US acreage vs the data given to the market this week. Upcoming crop tours and yield surveys will be important as the market gauges the potential for lower yields.

Further analysis of USDA's acreage data is interesting. Principle crops "planted" estimated at 309.3 million. Add in 19.3 in preventive plant and we have total "intended" acres for 2019 of 328.6 million. That would be 7.1 million higher than last year.

CME Group announced that the margin to hold one corn contract is being raised from $1,000 to $1,150 per contract effective with yesterday's close. Some calendar spread rates are being increased as well.

The Trump administration will delay the 10% tariffs on Chinese products which had been scheduled to start next month until December 15 after a productive phone conversation.  The two parties also agreed to hold more talks in two weeks.

U.S. President Donald Trump has directly asked Japanese Prime Minister Shinzo Abe to buy farm products worth a 'huge amount', Kyodo news agency reported on Tuesday, citing unidentified Japanese and U.S. government sources. Japan and the United States have agreed to target a broad deal on bilateral trade by September, seeking to bridge differences of opinion over tariffs on beef and the automobile sector. (Reuters)

Managed money funds were estimated sellers of 27,500 corn contracts and 4,500 soyoil. They were thought to be buyers of 7,500 soybeans and 5,000 soyoil. They were neutral in wheat. Traders believe funds have sold 87,500 corn contracts already this week.

Limit down trade was noted again yesterday for live cattle and feeder cattle futures. Today's trade was already in expanded limits. Today's trade will remain so, $4.50 for fats and $6.75 for feeders. On the charts, it is clearly ugly. We pushed to new contract lows, pushed to new contract lows today on expanded limits and we closed at the low of the day.

We had expected a $3 to $4 hit to cash cattle this week from the fire. The market is apparently ready to go a bit deeper than that. This news is bearish for cattle prices as it means fewer hands bidding. Yes, we certainly will find a home for these market ready numbers but there will be a disruption for a couple weeks. On the other hand, a temporary lower supply of processed beef offered is supportive to wholesale beef. After two day's this week is up 9.99 for choice and 6.77 for select.

Hog futures seem quite keen on following all of the ups and downs regarding minor trade rhetoric. The market has just about removed all premium associated with Chinese buying of US pork, and the December contract is holding only a minimal premium at this time.

Dressed beef values were higher with choice up 7.74 and select up 2.29. The CME feeder index is 140.08.  Pork cut-out values were down 0.98.


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