February 18, 2018

Weather in Argentina Remains A Concern For Crops

February 12th, 2018

Good Morning! From Allendale, Inc. with the early morning commentary for February 12, 2018.  

Grain markets are dealing with the confirmation of large ending stocks from USDA last week. Volatility in outside markets such as stock indices, crude oil, and US Dollar are keeping grain traders on edge. Rallies in grains are being met with a strong headwind as farmers use the opportunity to price inventory.

CFTC Commitment of Traders report released on Friday showed managed money funds reduced net short positions in corn, soybeans and wheat. In corn they were net buyers of 48,018 contracts leaving them short 82,924 contracts. They were net buyers of 11,971 and 13,369 in soybeans and wheat, respectively.

World Weather Inc. says “Argentina’s bottom line remains one of great concern of falling production potentials. Late last week’s isolated to scattered showers and thunderstorms offered only limited relief and more drying this week along with warm to hot temperatures will further stress crops and pressure yields lower, especially for late season crops. Some rain is expected in the west this coming weekend and in other areas next week, but the precipitation will continue erratically distributed and mostly light.”

Ag Rural says only 10% of Brazil’s soybeans are harvested compared to 19% a year ago. Much of this delay is due to the delay in the state of Parana where only 1% is completed verses 13% last year.

RJO Radio on Friday talked with a Brazil consultant who believes both USDA and CONAB are underestimating the soybean crop.  Outstanding early soy yields, which are likely to trail off somewhat as harvest advances, along with 3% soybean area gain, suggests crop is closer to 117.5 mmt (or possibly higher).

Funds on Friday were net sellers of 10,000 contracts in corn, 7,500 in soybeans and 5,500 in wheat.

Truckers in Argentina ended a strike that had stalled grain exports and agreed to meet with transportation authorities later this month to resolve their differences, the government said on Saturday. (Reuters)

Federal Customs Service of Russia says wheat exports from the beginning of the agricultural season amounted to more than 24.5 million tons, which is 37% higher than the level of the same period in 2016 (17.9 million tons).

Chinese New Year’s Holiday starts on Feb 15 and runs through Feb 21st. This could reduce some trade volume.

US producing oil rig count jumped by 26 last week to 791.

Managed money funds were net buyers in live cattle of 7,019 contracts and net sellers in lean hogs of 13,229 contracts last week.

Cattle slaughter last week was estimated by USDA at 591,000 head, while trade was expecting 612,000 which put production at 2.1% over last year. The lwer production is likely due to supply of market ready cattle however supplies are expected to increase as placement numbers would suggest.

April live cattle futures are currently in a trading range between 122.00 and 127.00. Outside influences from the stock market and cash trade this week will help determine the attitude of traders and the direction of the breakout.

February lean hog futures will go off the board this week which could give April contract a reason for a bite of a rally because of its discount to cash index.

April lean hogs closed near weekly lows on Friday. Support now crosses at 67.75 with resistance at 72.00.

Dressed beef values were lower with choice down 2.01 and select down 1.05. The CME Feeder Index is 147.57. Pork cutout value is down 2.48.

Technical Chart of the Day

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