July 20, 2017

Wake Up Call

Export Sales Important To Long-term Uptrend

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

Grain markets are consolidating as traders wait for this morning’s weather model runs. We are picking up a little more farmer selling into the recent rally causing some head winds. The weak US Dollar is supportive to export competition.

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GFS model run late on Wednesday, mostly confined the ridge of high pressure over the western United States Jul. 28-Aug. 3, but a few brief periods of expansion into the southwestern Corn Belt were advertised. This was mostly similar to the midday GFS model run and continues to be a reasonable solution. The Canadian and European models had similar solutions with the Canadian and GFS Ensemble carrying the ridge axis more in the high Plains region rather than the Rocky Mountain region.  The evening model run was more aggressive with a trough of low pressure in the Corn Belt Jul. 30-Aug. 1 resulting in cooler temperatures relative to the previous model run. Thanks to World Weather Inc for the analysis.

Weekly export sales will be released by USDA this morning at 7:30 CT. Trade is expecting new sales for the 2016/17 for corn 150,000 to 350,000 tonnes, soybeans 100,000 to 300,000 tonnes, soymeal 0 to 150,000 tonnes and soyoil 5,000 to 25,000 tonnes. Sales for 2017/18: corn 200,000 to 400,000 tonnes, soybeans 1,300,000 to 1,800,000 tonnes and wheat 250,000 to 450,000 tonnes.

Funds were estimated to have been net buyers of 10,000 corn contracts, 8,000 soybeans, 3,000 soymeal and 3,000 soyoil contracts. They were net sellers of 1,000 wheat contracts.

EIA report surprised the trade with a decline in crude oil stocks, a substantial decline in gasoline stocks and distillate stocks declined while expectations were for a build.

Ethanol Production last week averaged 1.026 million barrels per day which was up 1.89% from previous week. Stocks as of July 14 were 22.137 million barrels. This is up 4.51% above last week.

Argentina's 2016-17 corn harvest will reach a record 49 million tonnes, says Agriculture Minister Ricardo Buryaile. This estimate is higher than the government's most recent official estimate for a 47.5 million tonnes harvest.

United States and China failed on Wednesday to agree on major new steps to reduce the U.S. trade deficit with China, casting doubt over President Donald Trump's economic and security relations with Beijing. (Reuters)

Fed Cattle Exchange auction sold only about 25% the cattle offered. However, the cattle sold were steady to higher than last week. Cash cattle trade in the country became active after the auction with NE feedlots moving cattle at 118.00.

Cattle on Feed report as of July 1 will be released on Friday at 2:00 pm. Trade average estimate is: On Feed 102.9%, Placed 106.1% and Marketings 104.7. No extra day during June compared to last year.

Cattle inventory as of July 1 will also be released on Friday at 2:00 pm.

Cold Storage report will be released on Monday afternoon.

August live cattle futures opened near session lows and closed near session highs. Technicians will be waiting for a move above 118.80 (50-day moving average) and recent highs to jump on the buyside.

August Lean hog futures found strength on Wednesday from technical buying, fund buying and the discount of futures to cash index. The august futures contract remains in an uptrend and consolidation pattern. Resistance is 85.67 the contract high, support now crosses at 79.77.

Dressed beef values were mixed with choice down .32 and select up .24. The CME Feeder Index is 149.16. Pork cutout value is up .70.

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