December 12, 2017

Global Supplies Dominate Attitude

Good Morning! From Allendale, Inc. with the early morning commentary for August 28, 2017. Looking forward to meeting many of you at the Farm Progress Show in Decatur, IL tomorrow.

Grain markets have been under pressure as global supplies of grain apply the pressure. Corn futures have closed lower 8 of the last 10 days for a move of $.35. We are nearing the end of month and a holiday weekend. A year ago the corn market rallied off of the August 30th low. With the technically oversold condition in corn and wheat, prepare yourself for a short covering bounce, which could occur at any time.

Allendale’s August Ag Leaders Webinar is set for this evening at 8:00 pm CDT. This month we will be discussing Yield Estimates and Macroeconomics with R.J. O’Brien’s Chris Modaff. Register Here

Allendale Farmer Yield Survey results will be released on Friday at 7:30 am CDT.

Statistics Canada will release crop production estimates on Thursday. Ahead of the report, analysts expect to see 26.2 million tonnes of wheat production, down from last year's 31.729. Canola is expected to total 18.6 mmt, down from 19.9 last year. Corn is estimated at 13.5, down from 14.0 last year.

NAFTA’s next round of negotiations starts on Friday in Mexico City. As part of the negotiation process, representatives from all three countries signed non-disclosure agreements. Don't expect daily announcements or drama during this process.

USDA crop conditions report on Monday placed the corn crop at 62% G/E compared to 62% last week. Soybean crop improved by 1% to 61% G/E compared to 60% last week. Spring wheat harvest is 76% complete compared to 66% last year.

Funds were estimated to have been net sellers of 7,000 corn contracts, 3,000 soybeans and 5,000 wheat on Monday.

Please fill out Allendale's 28th Annual Yield Survey, the final day of survey is August 30, 2017 with results being released on September 1, 2017. You know your fields better than anyone. Help with another successful survey. Call 800-262-7538 or go to http://www.allendale-inc.com/2017-yield-survey/

Brazil’s soybeans planted acres for the new 2017-18 grains crop (July-June) is likely to increase again, as has been the case in recent years, but total output might fall from the record 2016-17 season, analysts surveyed in a Reuters poll.

U.S. Economic markets this week will focus on Friday's Aug payroll report (expected +180,000) and the U.S. inflation outlook with Thursday's July PCE deflator report expected to remain tepid (expected unchanged from June's +1.4% y/y; core expected to ease to +1.4% y/y from June's +1.5%).

Key cattle dynamics to watch for changes:

  1. The large positive basis of cash to futures had feedlots willing open the gates for packers. The October contract has moved above the current cash prices.
  2. Cattle performance in feedlots has been above normal by 4 to 6%. This allowed cattle to be marketed ahead of normal.
  3. Replacement cost of cattle going into feedlots are now well above the selling price of fats coming out of feedlots. Feedlots are talking about placements for August falling well below last year.
  4. Profit margins will keep the packers killing as many cattle as possible. If feedlots resist lower prices, it could open the door for a rally.
  5. Meat supplies in the cooler are keeping pressure on all meats. Labor Day is typically the end of cookout season which is already known to the market place.

October live cattle futures traded above the 200 day moving average and closed slightly below the 20-day moving average on Monday. Current trading range resistance is 109.75 with support at 104.62.

Live hogs slide as packers prepare for a short production week due to holiday on Monday. However, two new hog packing plants to go on line September 5, 2017.

Lean hog futures broke through support on Monday as technical selling applied the pressure. Seasonal charts suggest a high tendency for hog futures to rally from late August through mid-September.

Dressed beef values were higher with choice up .18 and select up .32. The CME Feeder Index is 142.61. Pork cutout value is down .31.

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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