December 13, 2017

Wake Up Call

Grains Set For Possible Short Covering Surprise

Good Morning! From Allendale, Inc. with the early morning commentary for December 13, 2017.

Grain markets are adjusting to the confirmation of large supplies of corn, beans and wheat in the US and around the world. Holiday markets are upon us as traders prepare for year end book squaring and technically oversold conditions. Expect trading volume to decline over the next few weeks and volatility to increase.

Get the complete analysis of the December USDA Report from Rich Nelson (Click Here)

USDA December Supply and Demand report was supportive for corn due to the increase in "corn for ethanol" usage. The export number was unchanged although we are currently behind the pace needed to meet the USDA's goal.

USDA lowers soybean exports by 25 million bushels and raised domestic use by 5 million which increased the ending stocks by 20 million bushels to 440 million.

Wheat exports were cut by 25 million bushels by USDA. This adjustment raises wheat ending stocks to 960 million bushels.

CONAB, Brazil's agricultural department is projecting soybean production for 2017/18 at 109.2 mmt and total corn production 92.2 mmt.

Brazil's soybean planting progress for 2017/18 is average at 94% only 1% behind last year's pace. Their first crop corn planting is essentially complete. Trade is concerned about the number of acres that will be planted to safrinha corn due to low prices and currency exchange rates.

White House will host talks between the rival oil and ethanol industries on today in hopes of brokering a deal to help refiners struggling to meet the country's biofuels policy, according to sources familiar with the matter. (Reuters)

World Weather Inc. says, "A ridge of high pressure will still promote hot and dry conditions in northern production areas of Argentina Wednesday through a majority of Saturday. A frontal boundary will gradually move from south to north across the country Saturday into Sunday. This will promote showers and thunderstorms, mostly in southern and central areas of Argentina..."

FOMC meeting decision, the market is discounting a 100% chance of a +25 bp rate hike to a new funds rate target of 1.25% to 1.50%.

Fed Chair Yellen today will hold a press conference after the FOMC meeting. Today's press conference will be Ms. Yellen's last. Ms. Yellen is then due to step down as Fed Chair in February when her Chair term expires, and Jerome Powell takes over as the new Fed Chairman.

Fed Cattle Exchange is offering 704 head for auction this morning. The rally in futures yesterday should be supportive to feedlot manager's asking prices. Country auctions this week have been lower than the previous week.

February live cattle futures rallied on Tuesday to relieve some of the oversold condition. However, fund liquidation could impact price rallies as we approach the end of the year. Technical support is 117.57 with resistance crossing at 122.62.

December lean hog futures will go off the board on Thursday. The February lean hog contract continues to be pressured by weak cash hog prices. Supplies of market ready hogs remain plentiful and is weighing on prices.

February lean hogs have support at November lows of 66.25 with resistance at 69.00.

Seasonals suggest a possible low for the February and April hogs by December 17. USDA Hogs and Pig Report is set to be released on December 22, 2017.

Dressed beef values were mixed with choice down 1.47 and select up .26. The CME Feeder Index is 154.40. Pork cutout value is down .57.

Technical Chart of the Day

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